Silicone Price Transmission — From MG-Si to Silicone Oil
title: "Silicone Price Transmission — From MG-Si to Silicone Oil" description: "How metallurgical silicon prices propagate through DMC, silicone oil, and downstream products — the price transmission chain, lag times, and margin structure." section: "market"
The Price Transmission Chain
Silicone prices are fundamentally anchored to metallurgical silicon (MG-Si) costs because silicon metal is the single largest raw material input — approximately 35–45% of DMC (dimethyldichlorosilane) production cost at typical Chinese capacity utilisation.
The chain from rock to silicone oil runs through four price-setting nodes:
1. MG-Si spot price (Yunnan/Xinjiang, CNY/tonne) → 2. DMC price (methyl chlorosilane monomer, after Rochow synthesis + distillation) → 3. D4/D5 cyclic siloxane price (ring equilibration from DMC hydrolysis) → 4. Silicone oil / silicone rubber price (polymerisation from D4 or linear PDMS)
Lag and Amplification
Price transmission is not instantaneous. Inventory buffers, long-term contracts, and processing time introduce lags:
| Transmission step | Typical lag | Amplification factor |
|---|---|---|
| MG-Si → DMC | 1–3 months | 0.8–1.2× |
| DMC → D4 cyclic | 2–4 weeks | 1.0× (near 1:1) |
| D4 → PDMS oil (commodity) | 1–4 weeks | 1.1–1.3× |
| PDMS oil → formulated product | 1–6 months | 1.2–2.0× |
The amplification at the formulated product end occurs because blending and formulation margins are quoted in absolute CNY or USD per kg rather than as percentages, so when input costs fall, formulators capture some of the margin.
The 2021–2024 Price Cycle
MG-Si spiked from ¥10,000/tonne in early 2021 to ¥38,000/tonne in October 2021 (energy restrictions in Yunnan + aluminium demand surge), dragging DMC from ¥15,000/tonne to ¥45,000/tonne. By end-2023, Chinese capacity additions collapsed MG-Si back to ¥9,000–11,000/tonne and DMC to ¥14,000–16,000/tonne.
Buyers who signed long-term contracts at 2022 peak prices faced significant margin compression as spot prices fell.