Capacity relief still far off for US silicone demand

Ravenna, Ohio – Silicone supply in the US is still strained and is not likely to improve within the next two years, according to Erick Sharp, CEO and president of Ace Products and Consulting LLC.

While several expansions have been announced, the details surrounding them means actual capacity changes are still some distance off, said Sharp during a free "silicone market analysis" class offered by Ace.

From the planning stage, to engineering & design, to construction and then scaling up, Sharp said capacity expansions take between 2-3 years.

"I over-analyse a lot of these press releases because of the wording that gets in there," he said.

According to Sharp, if producers say they're still evaluating the location of the plant, they are not far along on the engineering planning.

“Unless there's a shovel in the ground, you're still 2-3 years out. And there's not a whole lot of shovels in the ground right now," he noted.

The current trade war between the US and China is also impacting the supply of the material in the US.

“If it weren't for the US' current trade war with China, supply would be dumping into the US at aggressive prices,” Sharp said.

As it stands, the main tariff codes for silicone in its primary forms at 3% across the board. In its elastomeric form, it has no initial tariff on it.

However, silicone is named on the additional tariff list, which includes a 25% tariff that can be stacked onto the previous 3% for a 28% increase coming into North America.

Shipping costs have also gone up 35-40% compared to 2017, with congestion in Chinese ports and lack of shipping containers and vessels, according to Sharp.

Also, on top of the duties, most buyers aren't bringing in full containers just for themselves, so some varying warehousing costs are likely added as well.

Photo by Kyle Brown, Rubber & Plastics News