In early June, affected by the Sino US trade war, a shares fell sharply at the beginning of last Tuesday, continued to be weak on Wednesday and Thursday, and rebounded on Friday under the leadership of gem. Silicone board rose on Friday, including Jitai shares rose by the limit, Xin'an shares rose by more than 5%, and Runhe materials, Xingfa group and Hesheng silicon industry followed suit.

On June 15, the United States issued a list of commodities subject to additional tariffs on China. In the second batch of tariff lists, primary siloxanes (3910) from China will be included in the tax items. China also plans to impose a tax on the organic silica gel products imported from the United States in the fight back against trade with the United States.

According to the U.S. Bureau of statistics, in 2017, U.S. organic silicon exports to China amounted to US $158 million, ranking first in the United States, accounting for 12.0%. Even more than the neighboring countries Canada and Mexico (2012-2016 are the largest consumers). China's Silicone trade deficit with the United States is US $158 million in 2017, while China's export to the United States is only US $68 million. If the silicone trade station breaks out with the United States, the relative interests of the United States may be damaged.

If the trade war is carried out, China will impose tariffs on organosilicon imported from the United States, which will have short and medium-term effects

(1) In the short term, the import price will rise and the import cost will rise. The export volume of us silicone to China may be suppressed, and the domestic self-sufficient enterprises will benefit more;

(2) In the medium and long term, if China purchases less silicone from the United States, it will be conducive to domestic import substitution and domestic silicone industry. The integration, especially the comparative advantage of enterprises in the middle and lower reaches, will be more obvious.

At present, the domestic DMC production capacity is close to full capacity. Due to the relatively backward process abroad, the long-term operation rate of domestic monomer plant is only 70-80%, and the average overhaul time of the plant is long, which means that it is more likely to face technological transformation in the future. If China's domestic imports are adopted after the Sino US trade struggle, the downstream silicone will continue to be subject to supply restrictions and price repression

At present, the production time of existing units in China is generally around 2008, and the production age is nearly 10 years. Only half of them have sufficient technical transformation units, which means that half of them are easy to bear the safety risk when they are overloaded. It is expected that there will be a large probability of centralized technical transformation in the next two years.

The downstream applications of organosilicon in the world are mainly concentrated in the fields of architecture, electronics, automobile, medical treatment, chemical industry, etc. Geographically, the silicone industry is mainly concentrated in Asia Pacific, North America and Europe. The Asia Pacific market accounts for nearly half of the total. China's Silicone market accounts for about a quarter of the total, while North America and Europe each account for about a quarter.

From 2011 to 2016, the compound growth rate of the North American market was 4.6%, that of the Western European market was - 0.3%, that of the world average was 2.7%, that of the Asia Pacific region was 4.2%, and that of the Chinese market reached 7.4%, which was the fastest growing country in the world.

The downstream market of organosilicon is mainly controlled by overseas giants. The intermediate DMC is further processed to produce silicone rubber products, silicone oil, silicone resin and other downstream silicone products. The downstream market is mainly controlled by Dow Corning, Wacker chemical, maitu new materials, Xinyue chemical and other four giants. These four silicone enterprises from Europe, America and Japan hold more than two-thirds of the global market share.

Although the output and sales volume of Chinese enterprises are high, the silicone products they sell are mainly concentrated in the middle and upper reaches of the industrial chain, and the gap in technology makes the domestic silicone products can only be used for the production of low-end silicone products. The quality of polymerization intermediates has a certain gap with the level of overseas enterprises, which leads to the relatively low-end products and low market share of Chinese silicone enterprises. On the other hand, this shows that there is a huge room for progress in China's silicone industry in the future. In 2016, China's Silicone Market Size accounted for 23.69% of the world. If the unit price reached the average level of Asia Pacific, the world and even the United States, China's share would increase by 3.2%, 7.6% and 16.5% respectively.

The short-term prosperity of the silicone industry, combined with the impact of the Sino US trade war, will be more prominent when the market rebounds. In the long run, the demand of the Asia Pacific market is growing fast, and half of the domestic manufacturers will focus on technological transformation in the next two years. From the medium and long-term perspective, the development of China's silicone industry will become the world's leading import and export fortress in the future.