Improvement in the German Silicone Oil Market in August: Rising Demand Drives Growth
In August 2024, silicone oil prices in Germany showed a slight upward trend. This price movement was influenced by several key factors, including demand recovery in the automotive industry, increased industrial production across sectors, and supply constraints due to production challenges. This month, demand for silicone oil was moderate, driven by higher automotive output (particularly for premium vehicles) and surging industrial activities in construction, electronics, and personal care. However, mixed economic indicators and supply-side issues played a significant role in shaping market dynamics.
The recovery of the automotive industry significantly boosted demand for silicone oil. As a major consumer of silicone oil, the industry—according to data from the German Association of the Automotive Industry (VDA)—showed promising growth, with domestic vehicle production rising 13% year-on-year. This growth was particularly strong in the production of premium vehicles with advanced features, which heavily rely on silicone oil for various applications. Additionally, the expanding electronics and semiconductor industries drove increased demand for silicone oil, which is widely used in these sectors.
In August 2024, silicone oil production in Germany faced several challenges. Despite pressure from supply constraints, weak demand alleviated more significant price surges. Germany exports silicone oil to major markets including China, Italy, France, India, and the United States. Freight trends were mixed, with Asia–East Coast U.S. prices rising 3%, while other routes saw slight fluctuations. External factors such as Typhoon Gaimai also caused global shipping disruptions.
The German economy entered a contraction phase in the second quarter of 2024, facing headwinds from weak private consumption and a struggling construction sector. Despite initial optimism, the economic outlook remained bleak, with persistent stagnation.
Furthermore, crude oil prices—a critical factor in silicone oil production and transportation—surged by approximately 3% in August. This increase was primarily driven by heightened tensions in the Middle East and production halts in Libya. Internal conflicts in Libya led to the closure of major oil fields, reducing the country’s daily output by approximately 1 million barrels. The resulting global crude oil supply shortage exerted upward pressure on oil prices, thereby impacting the cost structure of silicone oil production.
Looking ahead, the outlook for silicone oil prices in Germany remains cautious. While the automotive and solar industries are expected to continue supporting demand, challenges in the broader economy—including a struggling construction sector and mixed economic indicators—may curb further price increases. Additionally, the easing of supply constraints as production stabilizes and inventory levels adjust could help mitigate price volatility in the coming months. However, ongoing tensions and potential disruptions in global supply chains may introduce additional volatility to the market. Overall, a balanced approach to managing production and inventory levels will be crucial for maintaining price stability in the short term.