FAIRLAWN, Ohio—Silicone industry markets aren't just recovering from the recession, they will surpass previous gains in coming years, according to a report by market forecaster Freedonia Group.
Kent Furst, polymers senior analyst for the Cleveland-based firm, said U.S. demand for silicones should grow more than 5.6 percent per year to more than $4 billion through 2016. He spoke at the May 1-2 International Silicone Conference in the Akron suburb of Fairlawn.
This is “a considerable improvement over growth from 2006-11,” according to Furst.
He said economic output declined in 2008-09 and rebounded in 2010, but recovery slowed in 2011 because of weak gains in household income and consumer spending. Through 2016, however, Freedonia expects economic growth will average 2.7 percent per year in constant inflation adjustment dollars.
“The good news is that this is a return to prerecession levels of growth,” Furst said, “but it lacks the sort of bounce that we typically see when an economy recovers from a recession.”
This recovery will propel growth in all sectors of the silicone industry, including industrial, consumer, construction and medical, Furst said. Silicone demand will outpace market value through 2016, and begin to track over economic growth from 2016 to 2021.
Silicone prices were pulled in opposite directions from 2001-11, with feedstock and energy costs rising, and the shift of silicone products becoming commodities, driving prices down. Through 2016, Furst said he expects a slowdown in price increases as energy and raw material costs moderate.
The construction and medical markets will be the fastest growing, he said, but for very different reasons. Construction still hasn't recovered from the recession, Furst said, and will continue to post tepid results through 2013, after which it is expected to see a sharp spike. Medical, however, wasn't affected by the recession, so its growth has been and will continue to be unhindered.
Industrial markets will lag slightly over the long term, he said.
Motor vehicle output fell 40 percent during the recession, but vehicle production has seen a considerable rebound since then. Furst said that will continue to recover through 2016, and besides the higher output, the amount of silicones used per vehicle will increase over time.
“Rising fuel efficiency standards in the U.S. will be a major factor since auto makers will become more willing to use silicones if it results in vehicle weight reduction,” Furst said.
Silicones also boast performance advantages in sealants and lubricants that will help propel their growth in automotive, he said.
On a per vehicle basis, the analyst expects silicone demand will rise from $22 per vehicle in 2001 to almost double that amount in 2021.
Look at regulations
Furst said silicones in general have had a perception of being more environmentally friendly than petrochemical-based materials, which has benefited sales. However, with siloxanes recently being added to the Environmental Protection Agency's list of Chemical Action Plans, there could be more controversy in the future.
It's possible silicones could even become a consumer-perceived environmental problem, rather than one deemed necessary of official restrictions, Furst said.
“We're starting to see a rising number of personal care products labeled as silicone free, although this seems to be limited to the natural care products sector now,” he said.
But Furst doesn't see it hurting the market in the long term.
“Ultimately it seems doubtful that there will be large-scale restrictions on silicones in the near future,” Furst said. “Even in a worst case scenario where methylsiloxanes become banned, the most likely outcome is product manufacturers will reformulate to use other silicones rather than alternative chemicals.”