The declaration of force majeure for a Wacker Chemie A.G. high consistency rubber silicone product line at its factory in Burghausen, Germany, in the first week of January was the starting point of another year marked with tenuous silicone supply.
From suppliers to producers, companies spent 2018 facing silicone shortages and allocations with some improvement over the previous year, and while there is some light at the end of the tunnel, it's likely still a few years away, industry professionals said.
The supply situation differs between those processing liquid silicone rubber and those making HCR silicone goods, said John Timmerman, vice president of sales and marketing at Starlim North America Corp., a producer of LSR molded goods based in London, Ontario.
"It is still very tight and, for those users who have well-managed supply chains and good communication with their customers and suppliers, the situation has been manageable for LSRs," Timmerman said.
For HCR silicone, recent market developments such as the Wacker force majeure announcement have taken a market already in short supply and "made it a disaster for many users of HCR silicone," he said.
The overall supply situation for both buyers and sellers is "a mess," said Len Rogers, supply chain manager, silicone, metal and metal fabrication, for Freudenberg-NOK.
"There's shortages everywhere in the market," Rogers said. "Most of those shortages, in our opinion, stem from the basic raw material siloxane, and there's been no investment, no basic plants, no basic assets added in the past decade by any of the major suppliers. I think that's coming to fruition as demand's grown, where the manufacturers are making some hard choices in where they supply and who they supply."
While the industry is still seeing a fair amount of allocations, there are fewer in general, said Erick Sharp, president and CEO of Ace Products and Consulting L.L.C., based in Ravenna, Ohio. But the fact that those allocations are still in place shows that the industry still hasn't gotten back to a balance point.
"There's still obsoleted product lines, and this force majeure shows that it's hand-to-mouth still," he said. "Nobody is necessarily getting everything they need. We still have customer bases trying to offset things so they can maintain supply."
Companies are still being throttled back on additional supply or coming up short on necessary product, Sharp said. Some of that rationing loosened last year, but many products that were taken off the market in that time frame have yet to return.
Some companies are seeing a more optimistic picture coming away from 2018, seeing the year as a low point. Rick Rey, president of Niles, Mich.-based Specialty Products & Polymers Inc., said the current state of supply remains the same as 2018, though his suppliers expect some improvement in the new year.
Pradnya Parulekar, vice president of global business development for silicone and polymer medical product manufacturer Raumedic Group, said she believes they've seen the worst of it.
"We anticipate things will get better over the next 18 months," Parulekar said. "The raw material suppliers are actively implementing plans to ameliorate the shortages. These include infrastructure upgrades, efficiency improvements and negotiations with their own suppliers."
The biggest market force affecting the silicone market is just the overall availability of raw supply, Rogers said. Momentive Performance Materials Inc.'s Leverkusen, Germany, facility shut down, which took 80,000 tons of siloxane out of the market.
"Depending on who you talk to, some estimates are roughly 10 percent of global capacity for siloxane have been taken offline since 2010. That's not good," Rogers said.
Timmerman said the shortage was caused by the constant growth of silicone polymer applications greater than GDP growth in most continents, without a corresponding investment in capacity following the financial crisis in 2008-09.