German Silicone Oil Prices Recover in February 2024 as Business Confidence Improves

Hamburg (Germany): Silicone Oil prices in Germany showed a bullish trend in February 2024 despite strong winter conditions and supply challenges. This trend was anticipated by ChemAnalyst as German markets are currently undersupplied with Silicone Oil, leading to inventory pressures. Multiple market players globally, including Evonik and Wacker Chemie, anticipate a gradual recovery in volumes and prices in FY24. However, volumes are not expected to fully recover until FY26, according to a CEFIC official. Demand for heavy lubrication and detergency in German markets remained subdued in the given month, although recoveries in certain sectors prompted suppliers to improve their business confidence, resulting in increased import volumes and prices.

Supply chain disruptions continue to exacerbate pricing woes and increase uncertainty regarding raw materials and Silicone Oil supply from Asia. ChemAnalyst projects Silicone Oil prices to continue increasing for the next three months primarily due to continued supply chain disruptions.

In German markets, prices rose in February by $50 per metric ton. This increase is reflected in the rise in imports of silicone feedstocks and improvement in manufacturing as energy contracts negotiated since June 2022 expired. Insights into Silicone Oil markets reveal that energy costs, coupled with reliance on imports from the USA, Netherlands, and Belgium, remained strong in FY23 and continue into FY24 as German domestic manufacturing remains low, albeit improving. Energy prices have decreased by 57% since the peak in October 2022 but remained 16% above the five-year average from 2014-19.

Market intelligence from secondary sources indicates that FY23 saw a slowdown in Silicone Oil imports by 23% in volumes and 7% in terms of pricing, indicating weaker demand in downstream manufacturing and lubrication markets. Silicone Oil demand from the cosmetics and detergent markets also showed recovery in February in the consumer sector as warmer winter weather prevailed.

On the supply side, riverine trade improved in February, allowing pending orders to be cleared through Belgium and the Netherlands. Rail strikes since January in Hamburg and other German cities affected rail cargo trade between the Netherlands and Germany, leading to a 33% increase in supply prices in January and February. However, by the end of February, supply had eased significantly. February also saw strong stocking demand for Silicone Oil as suppliers planned to improve inventories for downstream suppliers, anticipating a two-week offline period for East Asian markets, further increasing demand pressures.

Macroeconomic trends for the German Silicone Oil market favor price recovery as inflationary pressures gradually subside with domestic production expected to recover in the coming months. ChemAnalyst research suggests that Silicone Oil prices will continue to recover due to the ongoing Suez Crisis, inventory pressures carried over from FY22 and FY23, and the expected recovery in demand in domestic German and other European markets as manufacturing gradually improves in the coming months.