Dongyue's 25% production capacity suspended: Capacity Contraction Meets Sudden Incident, Will the Silicone Market Experience the "Craziest" Trend?

On July 20, 2025, a sudden fire broke out at Shandong Dongyue Silicone Materials Co., Ltd. The fire has been brought under control and extinguished. There were no casualties and no secondary disasters occurred as a result of the incident.

Shandong Dongyue Silicon Materials Co., Ltd. is a high-tech enterprise specialized in the research, development, production, and sales of silicone materials. The main products include silicone rubber, silicone oil, silicone resin, fumed silica, and silicone intermediates, with a silicone production capacity of 800,000 tons. This incident occurred at the Phase III facility of the Shandong Zibo base.

On July 21, Shandong Dongyue announced that the affected facility is the Phase B bed of the Shandong base's synthesis project, which accounts for 25% of the total production capacity of the Shandong base. Although Shandong Dongyue activated the "one-click shutdown" system to prevent a greater disaster, the "recovery time is uncertain." Due to the uncertainty regarding the time to resume production and operations, it is initially estimated that this incident will have a certain impact on Shandong Dongyue's business performance in 2025.

Silicone monomers are core raw materials for the production of silicone rubber, silicone oil, silicone resin, and other downstream products. Their production is characterized by high danger and high concentration. As one of the top three companies in the industry, this accident not only directly impacts its own supply but also shocks the entire industrial chain through the "butterfly effect."

On July 7, Dow Chemical announced the closure of its siloxane facility at the Barry plant in the UK, involving a capacity of 145,000 tons of DMC. The closure is expected to begin in mid-2026 and be completed by the end of 2027. Following this news, the domestic organic silicon spot market prices surged. According to data monitored by the MRC Research Institute, the current mainstream price for domestic organic silicon DMC is 10,800-11,300 yuan/ton, an increase of 700 yuan/ton compared to early July.

As of noon on July 21, companies such as Luxi Chemical, Zhejiang Xin'an, Dongyue, Inner Mongolia Hengye, Hubei Xingfa, and Aiken Xinghuo have suspended quotations for organic silicon DMC. Due to a sudden fire at Dongyue in Shandong, it is expected that the prices in the organic silicon market may continue to rise.

The price of organic silicon DMC has risen, which first and foremost has led to increased cost pressure for downstream industries. In the construction industry, organic silicon sealants and waterproofing agents are widely used for sealing and waterproofing projects. As the price of organic silicon DMC rises, the production costs for companies manufacturing these construction materials have significantly increased. In the electronics industry, organic silicon materials are used in electronic packaging and potting, playing a crucial role in the performance and stability of electronic products. However, the rise in DMC prices puts electronic companies in a dilemma. If they increase product prices, it may reduce their competitiveness in the market, as competition in the electronics market is exceptionally fierce and price-sensitive. Conversely, if they do not raise prices, their profit margins will be severely squeezed.

In recent years, driven by high industry prosperity, domestic DMC production has significantly increased, with an average growth rate of 18% over the past five years. The substantial increase in capacity has led to a continuous decline in industry profitability, and previously planned projects have either been postponed or canceled, with no new capacity expected in the next two years. Overseas silicone companies are facing cost and environmental pressures, leading to a reduction in overall capacity. The domestic silicone industry has a cost advantage, and future export volumes are expected to grow steadily.