A better barometer for silicone in 2024? Suppliers, market experts, manufacturers weigh in

ANAHEIM, Calif.—While raw material pricing volatility continues to be a challenge in the silicone market, the versatile material is seeing far greater balance between capacity and demand across a range of industries.

Demand is rising in consumer wearables, for the material's biocompatability in health care and biopharma applications, as well as electronic devices.

Silicone's unique thermal and electrical insulative and conductive properties have the material at the forefront of many EV automotive applications.

And with its greater sustainability, resiliency and processability, LSR and HCR continue to be widely used in construction and industrial applications, such as seals and gaskets for use in extreme environments.

With a more balanced supply chain in the first half of 2024 against the pandemic headaches of 2022 and the overpurchasing and subsequent drawdowns in 2023, many experts see this year as the first clear look at the silicone market in the last half-decade.

"2024 is a truth-telling year for the silicone market," Erick Sharp, president and CEO of Ace Laboratories in Ravenna, Ohio, told Rubber News recently. "The supply/demand ratio has been tough to calculate the past four years due to two years of COVID impact, followed by pent-up demand. ... And last year we saw a lot of carryover inventory affect the numbers.

"2024 will be a good barometer to determine the current state of the market."

According to another market analyst, the global silicone industry is expected to reach about $21.5 billion this year, with a CAGR of 8 percent—topping out by 2029 at about $31.5 billion.

Other public reports spot the silicone space at between 6 percent and 7 percent CAGR over the next five years.

"A key driver of the silicone market is the ongoing industrial expansion in emerging economies such as China and India (mainly in infrastructure projects)," according to marketsandmarkets.com. "Although there are challenges, the market's versatility and expanding applications across various industries are likely to maintain its momentum in the years ahead."

Besides the industrialization trend, technological innovations—the onset of 5G, EVs, sustainability breakthroughs and IoT—are giving rise to the silicone industry, much of the demand in these areas coming via electrical insulation applications.

By end-use industry, industrial applications saw the highest global silicone use in 2023. By type, elastomer silicone sales far outpaced resins and gels over the last year.

The upstream Munich-based silicone (and refined polysilicon) supplier Wacker Chemie A.G. and its U.S. subsidiary, the Ann Arbor, Mich.-based Wacker Chemical Corp., see silicone as a rising star for the foreseeable future in the U.S.

"Moving forward, I see more opportunities in the U.S. than challenges," Christoph Kowitz, president and CEO of Wacker Chemical Corp., told Rubber News May 17.

But even with near- and onshoring production, the silicone industry is not without its challenges.

Key raw materials like methyl chloride and silicon metal continue to demonstrate volatile pricing, leading to reduced profit margins coming out of 2023 for silicone producers like Wacker, Momentive Performance Materials Inc. (U.S.), Shin-Etsu Chemical Co. Ltd. (Japan), Elkem (Norway) and Dow Inc. (U.S.).

"The current raw material pricing market is extremely volatile—raw material costs have been globally high for quite some time now," Kowitz said. "(And) the weak economy continues to affect customer order trends in numerous application fields. While demand for silicones picked up in some customer sectors at the start of the year, there is still some constraint, particularly in the construction industry."

With an eye toward the flourishing medical and biopharma niche markets in LSR, Trelleborg A.B. earlier this year spun off its global health care and medical division into a separate business unit, Trelleborg Medical Solutions.

Don Bonitati, director of product development at TMS, sat down with Rubber News in February at the MD&M West medical device show in Anaheim to discuss the virtues of LSR in designing products for manufacturing.

Trelleborg was on site to showcase its drug elution equipment for active pharmaceutical ingredients, including bioresorbable and biodurable materials.

The Swedish firm maintains a DFM facility in Tustin, Calif., to help customers bring silicone products to market more quickly—particularly in the ocular and women's health spaces—as well as a new innovation center in Plymouth, Minn., which focuses on medical and biopharma prototypes.

"We work with customers to target a release rate for their product, produce the product with the performance factors they are looking for and load the drug into the LSR device—this is where Trelleborg Medical excels with its experience," Bonitati said. "We are an expert in polymers, thermoplastics and on the elastomer side."

Trelleborg's processes include injection molding, micromolding, calendering and sheeting—"a wide array of processes that result in a better product coming to market," Bonitati said.

"For health care and medical innovators looking to create high-performing products and measurably reduce go-to-market timelines, our team at the (Plymouth) innovation center can create samples in days, enabling multiple design iterations to be tested to confirm effective production and rapid scale up," said Chris Tellers, global technology director with Trelleborg Medical Solutions. "Engineers and product innovators get direct access to some of the best minds in materials science, design for manufacturability, tooling and prototyping, plus proven processes for improving critical outcomes in development and manufacturing."

The new innovation center, which opened in June 2022, offers in-house tooling, with prototypes often available for a customer in a day or two—and typically scalable for production.

"We have a tool shop in Plymouth focused on prototyping only," Bonitati said. "Whether LSR molding or TPE molding, we have many different approaches we can take. Our Plymouth site allows customers to take the risk out of their process as much as possible."

Dale Gildemeister, vertically integrated solutions program manager with Trelleborg Medical, said customers "rely on us to help them engineer the risk out of their designs."

"A simplified supply chain makes it easier for us to control costs as well," he said in February. "When we take care of the details, customers can focus on creating innovative solutions to positively impact patients' lives."

Like many other LSR experts at MD&M West, Bonitati noted that supply and demand of silicone has been demonstrably more balanced to begin 2024.

"With LSR specifically, things have definitely balanced out," he said. "For the most part, there are no problems with the supply chain today. Sometimes there is a special, customized one-off that can be challenging.

"And customers often have concerns with cost or material, however they do not often have the leverage and flexibility that we do with custom compounders. And a multi-supplier philosophy, post-pandemic, is important. We often work with customers to develop an alternative material so that they have another option."

Tessy Plastics Corp., which celebrated 50 years last year, also said contract manufacturing is the name of the game for customers—typically OEs in the medical space—who are looking to design and produce medical components.

In fact, DFM often is the only game in town, according to Eric Yando, director of sales for Tessy Plastics, a custom contract manufacturer based in Skaneateles, N.Y.

The company works in the medical, pharmaceutical, diagnostics and consumer health care markets (in that order of market percentage) and typically in LSR, TPEs and thermoplastic urethanes.

"For us, there really was no more than the usual overbuying," Yando told Rubber News. "We were able to sustain during the pandemic and we did not miss any shipments to our customers."

Yando echoed Bonitati and others in citing the improved supply chain for silicone.

"Getting materials has been a little bit easier," he said. "We used some of our reserves, but from a supply perspective we are starting to come out the other side of it.

"There is a sense that this is the new normal ... and you have to shift your focus—whether it's hurricane season, COVID, whatever. The game has changed and we have adapted our business accordingly to account for things that should not be surprises any longer."

Tessy Plastics' Rob Benson, a research and development engineer, agreed.

"We are getting the LSR we need today," he said. "But we hedge heavily on being ahead of these things. During COVID we missed zero shipments. This speaks to the volume of material we get and the forward thinking that we have."

Wacker Silicones, one of four major business divisions for Wacker Chemie, also was on-site in Anaheim to tout its upstream material quality. Wacker works with and sells its silicones to OEs and contract manufacturers.

Kyle Gaines, marketing manager for Wacker Silicones, said the EV market remains huge for thermally conductive silicones, as does his silicone province of HCR and LSR for medical and biopharma components.

"On the supply side, yes, the market is better," Gaines said. "Allocation during COVID was difficult for everyone, figuring out who had priority. Right now we have invested in capacity and the pressure has been relieved from the market."

Specifically, Wacker has invested about $50 million in a new research and development center in Ann Arbor, Mich.; about $200 million in an HCR and fumed silica plant in Charleston, Tenn.; and millions of dollars in facilities in China, India, Germany and the Czech Republic, the latter four mainly for increased LSR capacity.

Shin-Etsu recently invested about $13.4 million in a silicone products manufacturing plant in China; and announced a $690 million program in August 2023 to increase capacity for its environmentally friendly silicones.

"Now that we have the capacity, the market has evened out and lead times have been reduced quite a bit," Gaines said. "I think the future is bright. Will we see a soft rebound? I don't know that we will. We are still seeing some market declines on the material side, and some markets have slowed. But on the LSR side, the market is stable, with combined growth year-over-year."

Gaines said some pricing pressures at the end of 2023 have continued this year.

"But now, with no allocation, we have more freedom," he said. "The future is bright from a health care perspective. With digital transformation in health care—more wearables, more telehealth connecting people—data is going to be key.

"We are uniquely positioned from a silicone perspective with battery thermal management, conductive silicones and the Internet of Things coming out of health care, as well as the commoditization of wearables that provide this data.

"We have a lot of big announcements coming in the next year."

While market drivers are critical, silicone rubber products remain subject to an array of regulatory hurdles across the world, particularly in health care/bioresorbables and consumer personal care products.

In fact, the D4 through D6 monomers (siloxanes), used as building blocks for silicones, have come under fire in the last decade in the European Chemicals Agency and the U.K. Competent Authorities, which, as of May 15, continue to restrict their use if they comprise greater than 0.1 percent of the personal care product.

In the U.S., the Restriction of Use of Hazardous Substances, the Dodd-Frank Act and the International Traffic in Arms Regulations can restrict the use of silicone rubbers.

But no region is as tight as the EU, according to Shin-Etsu's Alexandra Rinehart, who spoke in 2022 at Rubber News' Silicone Conference in Cuyahoga Falls, Ohio. There has been little change in the monomer restrictions since then, according to marketsandmarkets.com.

"The EU seems to find that the only appropriate risk is zero risk, and this is not feasible in most countries," Rinehart said.

In the U.S., weight-of-evidence guidelines are followed, though they can vary by state.

"Everything we have done both past and current is to follow these guidelines," Rinehart said. "I don't anticipate (any of the current regulations) getting worse (in the U.S.), but different states have their own regulations."

To wit, if states use an EU-based set of parameters, or the ECHA has made a determination affecting their state (as an import), that could be used as a benchmark for disclosing information, she said.

There are no restrictions from Canada on silicone materials.

South Korea has included the three monomers on its "Priority Control Substance List," but the only requirement is for an end-use manufacturer to report the use for the monomer.

From Brazil to Australia, other non-EU countries differ slightly in their assessments but generally maintain similar regulations to the U.S., Canada and South Korea.

Australia has determined that the three monomer variants do not pose a significant risk to aquatic life, and no restrictions exist on any of the three.

A more complete assessment of silicone monomer is set to be complete in China by the end of this year, according to the Silicones Environmental, Health and Safety Center, a subset of the American Chemistry Council.

And Japan, in 2017, added D4 and D6 to its chemical control law, but the two variants have no restrictions on their use in the country today.