Wanhua Chemical Expands by 20,000 Tons to Enter China's High-End Silicone Oil Market

Wanhua Chemical has recently released the draft Environmental Impact Assessment (EIA) report for a capacity expansion project involving an additional 20,000 tons/year of polydimethylsiloxane (PDMS). The new capacity will be added to its existing facilities in the Yantai Chemical Industrial Park, Shandong Province, through the construction of two new production lines. Upon completion, the total annual capacity will increase from 9,000 tons to 29,000 tons.

PDMS, also known as dimethyl silicone oil, is a type of high molecular weight polymer. Depending on its molecular weight, PDMS can appear as a colorless, transparent, volatile fluid, a highly viscous liquid, or even as silicone rubber. As a high-end product within the organosilicon value chain, PDMS is widely used in medical devices, electronic encapsulation, and aerospace applications, owing to its exceptional heat resistance, electrical insulation, and biocompatibility. For many years, the high-end PDMS market has been dominated by global giants such as Dow and Wacker.

This expansion is not merely a matter of scaling up production. The EIA report mentions a "production line adjustment," indicating a potential technological upgrade. The Yantai Chemical Industrial Park already hosts a fully integrated circular economy chain-from methanol and salt chemicals to MDI production. Key raw materials for PDMS production, such as methyl chloride and silicon metal, are available within the park. This vertically integrated model is expected to reduce raw material logistics costs by approximately 30%, while by-product hydrogen chloride can be reused in MDI production, significantly improving overall energy efficiency. Once the new capacity is operational, it is expected to attract downstream industries such as silicone oil and silicone resin manufacturers, further consolidating the local industrial ecosystem.

As of 2024, China's total PDMS capacity has reached 450,000 tons/year, accounting for 58% of global capacity. Major domestic producers include Hoshine Silicon Industry, ZhongAn Technology, Dongyue Silicone, and Wanhua Chemical. While there is now a structural surplus in construction-grade PDMS, a significant supply gap remains in the high-end segment, with around 80,000 tons/year of electronic and medical-grade PDMS still reliant on imports. In 2023, China's import dependence for high-end PDMS remained as high as 65%.

The market structure for PDMS in China is undergoing a transformation. The construction sector remains the largest demand source, but its growth is slowing due to real estate controls, and its share is declining. Meanwhile, emerging sectors-electronics, new energy, and medical applications-are experiencing rapid growth and are expected to drive market expansion over the next five years. In the new energy sector, PDMS demand for silicon-based anode materials is growing at over 40% annually. In electronics, 5G base station encapsulation materials require higher-purity PDMS. The global medical aesthetics market for silicone implants is projected to exceed USD 12 billion by 2025.

In 2022, Wanhua Chemical successfully built China's first continuous PDMS production line with independent intellectual property, breaking the foreign monopoly on specialty organosilicon manufacturing processes. Following this capacity expansion, the 29,000-ton scale will place Wanhua among the global top-tier PDMS suppliers. It is especially well-positioned to replace imports in high-end segments such as medical-grade and optical-grade PDMS. Additionally, the economies of scale achieved from this expansion are expected to further reduce production costs and enhance price competitiveness.