Silicone Sector Swings Back to Profitability on Tightened Supply‑demand Fundamentals

As a vital category of advanced chemical new‑material, silicone finds extensive deployment across construction, photovoltaic power generation, energy storage, new‑energy vehicles and semiconductor electronics. Following two difficult years defined by capacity surpluses and steep price corrections, the domestic silicone market has entered a cyclical reversal through the first half of 2026. Profitability across the sector keeps repairing, and listed operators deliver markedly improved financial returns.

Market sentiment for silicones has moved firmly upwards across the first six months of the year, with clear profit recovery for core intermediate products. Domestic market average pricing for silicone DMC stood at RMB 14 400 per tonne over the year‑to‑date period, representing a 13 per cent year‑on‑cent rise. Industry sources indicate that sustained low pricing for upstream silicon‑metal feedstock delivers solid cost‑side backing for the sector revival. Lower manufacturing expenses have dismantled the previous industry dynamic of high production costs paired with weak selling prices and depleted margins.

Rising product quotations alongside eased input‑cost pressures have lifted earnings for publicly‑traded participants along the value chain. Leading manufacturers including Dongyue Silicon Materials, Hesheng Silicon Industry and Zhejiang Xinan Chemical Industrial Group record standout half‑year performances.

Dongyue Silicon Materials posts explosive profit expansion. Operating revenue reaches RMB 2.665 billion for the first half, up 14.50 per cent year‑on‑year. Net profit attributable to parent‑company shareholders hits RMB 429 million, surging by 916.22 per cent. Improved supply‑demand balances push product sale prices higher, while cheaper silicon‑metal procurement cuts unit manufacturing expenses and delivers substantial gross‑margin expansion.

Hesheng Silicon Industry returns to positive net earnings. It generates half‑year operating revenue of RMB 10.16 billion and attributable net profit of RMB 324 million. Second‑quarter attributable net profit registers RMB 247 million, showing sharp sequential improvement.

Zhejiang Xinan Chemical Industrial Group achieves operating revenue of RMB 8.563 billion in the reporting period, marking a 6.26 per cent year‑on‑year increase. Attributable net profit amounts to RMB 254 million, climbing 268.03 per cent compared with the corresponding prior‑year period. Half‑year profit already exceeds full‑year 2025 net‑profit levels. Its silicon‑based new‑materials business rebounds from cyclical lows. The group channels greater resources into high‑value‑end silicon‑based end‑products and makes headway in overseas market development. Export volumes for silicone goods rise by 36 per cent year‑on‑year, bringing both volume and quality gains for its international‑facing operations.

Optimising supply‑demand conditions form the core driver behind this round of industry recovery. No new domestic silicone‑monomer capacity comes on stream during the first half of 2026. Total domestic DMC capacity remains steady at 3.44 million tonnes by the end of June, with almost zero incremental new supply in the short‑term outlook. Industry‑led self‑regulatory production arrangements keep plant operating rates within reasonable ranges. These measures balance market supply and demand and stabilise competitive dynamics, laying foundations for firmer product prices and margin restoration. Meanwhile, overseas production capacity continues to exit the market, further consolidating China’s global competitive position within silicone manufacturing.

Down‑market consumption patterns also show tangible improvement. This cyclical upturn differs from earlier industry cycles, as downstream demand undergoes structural upgrading. The silicone sector is reducing historical reliance on traditional real‑estate and building‑materials segments, with consumption momentum shifting towards high‑growth emerging‑industry applications. Listed companies along the industrial chain adjust product portfolios, lowering output and sales shares for low‑margin general‑purpose silicone rubber and silicone oils, and reallocating resources into higher‑value‑speciality‑silicone streams to advance industrial transformation.

Xinan Chemical has commissioned a commercial demonstration project for silicon‑based immersion liquid cooling for computing infrastructure, rolling out three product lines of silicon‑based cooling fluids tailored for computing‑power hardware, energy‑storage installations and fast‑charging equipment, gaining entry into liquid‑thermal‑management scenarios for supercomputing centres, though this business remains in early‑stage commercial roll‑out. Jiangxi Hongbai New Materials makes forward‑looking investments in upstream silicon‑based feedstocks for artificial‑intelligence computing‑power infrastructure. It plans new production capacity for optical‑fibre‑grade high‑purity silicon tetrachloride for high‑end optical‑fibre preform manufacturing, with commissioning scheduled for 2027.

Burgeoning demand from high‑end emerging sectors opens fresh revenue pathways for listed silicone‑chain operators. Expanding consumption within high‑end electronic packaging, AI computing‑power infrastructure and humanoid‑robot hardware will enlarge addressable markets for speciality silicone materials.