Looking ahead, by market
As uncertainty caused by the pandemic remains, silicone products related to transportation (auto, aerospace, mining) and personal care will continue to show the greatest declines, while medical is predicted to continue as the strongest market.
Construction is expected to pick back up and already is showing signs of doing so, while silicone in electronics is expected to “fair a bit better than average,” Furst said.
“Statistics are no substitute for judgment,” Furst said. “Numbers are important, but the story behind the numbers is more important.”
In construction, demand “is holding up better than most markets in 2020,” the economist said. “New construction is picking up. The bad news is in commercial construction, which will lag considerably as businesses rethink their footprints in light of the pandemic.”
Double-digit declines are expected in transportation for the silicone industry (on top of a weak 2018 and 2019), however Furst said there is good long-term potential here, especially for liquid silicone rubber specialties – a market that is still heavily focused on the US and Europe.
“LSR is a premium material,” he said. “It will do better than silicones overall. There will be a decline, but it should not be significant,” he said.
According to Furst, it all depends on the markets and their applications -medical is doing very well, especially for LSR. But more conventional applications, like generic automotive electronic connectors, are likely to decline.
In personal care, people continue to work remotely with few social gatherings. As such, silicones in this market show a sluggish long term forecast due to material competition and market maturity, as well as regulatory pressures, Furst said.
And as has been the case for many raw material markets, medical and health care continue to flourish.
“No surprise here,” Furst said. “There has been a desperate need for PPE, and medical devices like ventilators drove demand. Ongoing safety measures implemented should continue to benefit this market.”
In other markets for silicone products, oil and gas remains “way down” as drilling activity has declined. Paper and textiles remain “relatively weak,” Furst noted, and machinery has been hurt by a poor industrial capital market.
Foam stabilisers used in furniture, like polyurethane, are seeing an upswing that has been aided by an improving construction sector.
Pricing, Furst said, is perhaps the most difficult variable to predict, with the exception of the political effects on the silicone industry.
Currently pricing is down, along with demand.
“It’s very hard to forecast pricing,” Furst said. “But I do expect pricing to firm up over the next year, and then incrementally after that. Pricing is relatively low for now … and as long as that is the case, profitability will suffer.”
The silver lining for the silicone industry is that it has shown historical resilience, rebounding within a couple years following the great recession. It is expected to do so again following the pandemic.
“By 2022 or 2023 we should be able to make up the ground,” Furst said. “I expect the recovery will be about the same (as the great recession).”
