I. Completion of Elkem Silicones Asset Transfer and Official Rebranding to Bluestar Silicones

Bluestar previously completed the acquisition of Elkem’s entire global silicones business assets, with the final handover of cross-border assets concluded in April 2026. On June 23, an official announcement confirmed that the former Elkem Silicones would cease using its original brand identity and fully rebrand as Bluestar Silicones. Production facilities, sales channels, and R&D centers worldwide will transition their branding and operational systems in phases, while fully inheriting Elkem Silicones' existing global production bases, patented technologies for specialty silicon materials, and overseas end-customer networks. This acquisition is not merely a short-term asset transaction; it represents a strategic industrial adjustment aligning Elkem Group’s strategic contraction with Bluestar’s goal of perfecting its global silicones industry footprint.

II. Key Reasons for Elkem Group’s Voluntary Divestiture of the Silicones Business

Significant Mismatch with the Group’s Core Business Focus

Elkem Group’s core competitive advantages lie in upstream sectors—specifically silicon metal, carbon electrodes, and industrial silicon smelting—where it leverages its own hydroelectric and mineral resources to maintain stable cost advantages. In contrast, Elkem Silicones operates in the downstream fine chemicals sector, focusing on the R&D and production of silicone rubber, high-end silicone oils, and specialty electronic silicon materials. Its business model, customer base, and R&D investment cycles show minimal synergy with the Group’s primary silicon smelting operations. The Group plans to concentrate all capital, production capacity, and R&D resources on high-growth upstream raw material sectors—such as silicon metal and photovoltaic silicon alloys—and therefore chose to divest the silicones division, which offered limited synergistic value.

High Cyclical Volatility in the Global Silicones Industry and Weak Profitability Stability

The global market for basic silicone intermediates has long suffered from overcapacity; low-to-mid-end products are frequently mired in price wars, and the industry experiences significant cyclical fluctuations. Elkem Silicones’ overseas production bases are located in Europe and the United States, where costs for natural gas, electricity, and environmental compliance have risen steadily year after year. Consequently, their production costs are consistently higher than those of integrated plants in Asia. Even when profitable in the short term, the business lacks resilience against cyclical downturns, making it incompatible with Elkem Group’s long-term development strategy of focusing on upstream resource-based products and maintaining stable operations. The center of growth for the global silicone market has shifted entirely to the Asia-Pacific region.

New capacity, consumption demand, and growth in downstream emerging industries are all concentrated in the Asia-Pacific region, whereas demand growth in European and American markets has slowed, and the scale of new capacity additions there is limited. During its period of independent operation, Elkem Silicones faced high costs at its European and American facilities and insufficient growth in local customer demand, leading to a continuous erosion of market share. Transferring Elkem Silicones' assets to Bluestar—a company deeply rooted in the Asia-Pacific market—allows for the leveraging of low-cost, integrated domestic production capacity to open up global channels and revitalize existing overseas assets; meanwhile, the Elkem Group can fully exit the fiercely competitive downstream fine chemicals sector.

Recouping capital to double down on high-growth upstream sectors

The rapid expansion of the photovoltaic, energy storage, and lightweight new energy vehicle industries is driving long-term demand growth for silicon metal and industrial silicon alloys; these sectors offer significantly greater growth certainty than the saturated downstream silicone market. Selling the complete Elkem Silicones business allows the Group to recoup substantial capital for expanding its own mines and smelting facilities, thereby consolidating its core competitive advantages in upstream silicon raw materials while shedding the silicone business, which is characterized by high volatility and long investment-to-return cycles.

III. Integration of Elkem Silicones into the Bluestar system: Multiple impacts on the domestic silicone industry

(i) Addressing technical gaps in high-end silicon materials and narrowing price differentials between domestic and international products

Previously, high-end product categories—such as high-end electronic potting silicones, medical-grade silicones, and specialty liquid-cooling silicone oils—were long dominated by overseas manufacturers like Elkem Silicones. Domestic production capacity was largely concentrated in mid-to-low-end products like DMC and standard construction silicone rubber, resulting in a heavy reliance on imports for high-end goods. Following Bluestar’s acquisition of Elkem Silicones, it fully inherited over a thousand patented formulas for specialty silicon materials, mature industrial production processes, and a multinational R&D team. This has significantly boosted domestic self-sufficiency in high-end silicones, reduced reliance on imports for premium products, and gradually narrowed the price gap between domestic and international spot markets for high-end silicon materials.

(ii) Reshaping the global silicone supply landscape and enhancing the domestic industry's global influence

Currently, domestic capacity for silicone intermediates accounts for over 60% of the global total; however, mature overseas end-market channels and high-end customer resources were previously long controlled by foreign entities such as Elkem Silicones. By integrating Elkem Silicones' global network of over ten production sites and sales channels, Bluestar now possesses both large-scale, low-cost integrated domestic production capacity and localized overseas production bases in Europe, the Americas, and Southeast Asia. This enables flexible supply allocation based on regional demand, allowing for proximity-based supply to overseas end-customers, reduced long-haul logistics costs, and the mitigation of disorderly, low-price export competition for commodity DMC; consequently, the global bargaining power of the domestic silicone industry has been significantly enhanced.

(III) Smoothing global spot price fluctuations and tempering extreme market volatility

Previously, when Elkem Silicones’ overseas plants operated independently, fluctuations in energy prices in Europe and the Americas, along with regional supply-demand imbalances, often triggered significant volatility in global silicone spot prices. Following its integration into Bluestar’s unified management system, the company can flexibly adjust operating loads across various sites—balancing domestic seasonal demand cycles against shifting overseas regional needs. This alleviates issues such as concentrated inventory accumulation or supply shortages in specific regions, narrows the price fluctuation ranges for spot DMC, silicone rubber, and high-end silicone oils, and mitigates the industry's historically severe cyclical volatility.

(IV) Accelerating structural consolidation in the domestic silicone industry and driving a shift toward high-end production

As Bluestar incorporates Elkem Silicones' high-end production capacity and mature technologies, competition among domestic producers of low-to-mid-end commodity silicones has intensified. Industry resources are increasingly concentrating around leading enterprises that possess integrated supply chains and R&D capabilities for specialty silicones. Meanwhile, small and medium-sized enterprises lacking technological or cost advantages are being forced to either transform their operations or exit the market; this trend drives rising industry concentration and curbs the blind expansion of low-end production capacity in the long term. IV. Domestic Silicone Industry Chain Benchmark Prices (June 29)

Upstream Raw Materials

Silicon Metal (Grade 421#)

June 29 SunSirs benchmark: 12,480 RMB/ton; June 1: 13,150 RMB/ton (monthly decline of 5.09%). While phased production cuts for industrial silicon were implemented, weak downstream procurement demand caused raw material prices to retreat slightly.

Midstream Core Intermediates

DMC (Dimethylcyclosiloxane; core silicone monomer)

June 29 SunSirs composite benchmark: 14,420 RMB/ton; June 1: 14,960 RMB/ton (monthly decline of 3.61%). Coordinated industry production cuts provided a price floor, but weak demand during the off-season for end-use products kept spot prices trending slightly lower within a narrow range.

Downstream Mainstream Silicone Finished Products

107 RTV (Room Temperature Vulcanizing) Raw Rubber

June 29: 14,650 RMB/ton; June 1: 15,130 RMB/ton (monthly decline of 3.17%); dragged down by the off-season for construction sealants.

General-purpose Methyl Silicone Oil

June 29: 14,900 RMB/ton; June 1: 15,380 RMB/ton (monthly decline of 3.12%); sluggish procurement for daily chemical and textile auxiliaries.

High-end Specialty Silicone Oil (Photovoltaic/Electronic Grade)

No unified benchmark price; spot prices range from 18,500 to 23,000 RMB/ton, remaining largely flat compared to the beginning of the month. Supported by essential demand from the new energy sector, the decline was far less significant than that of general-purpose products.

V. Comprehensive Analysis of Domestic Silicone Spot Supply, Demand, and Price Trends (June 29)

1. Supply Side: Coordinated industry production cuts provide a firm price floor

From June to August, the domestic silicone industry is implementing a unified plan for phased emission and production reductions. The overall operating rate has fallen to approximately 61%—a drop of 5 percentage points since the beginning of the month—affecting monthly DMC... Market circulation has contracted significantly; production units are simultaneously controlling unauthorized output from bypass lines to prevent "covert operation during official shutdowns." Consequently, the volume of goods entering the market is limited, and factory inventories are seeing a slight, continuous decline; low inventory levels are preventing any sharp drop in spot prices.

Additionally, the integration of Elkem Silicones into Bluestar has enabled unified global capacity allocation. The pace of overseas high-end supply release is stable, and the disorderly dumping of domestic commodity-grade capacity has decreased, marginally easing overall supply pressure.

2. Demand Side: Traditional sectors are in the off-season, while high-end segments provide the only source of inelastic demand support.

Weakness in traditional downstream sectors

Construction sealants, personal care silicone oils, and textile silicone auxiliaries have entered the traditional summer off-season. Operating rates for real estate renovation and personal care product manufacturers have declined, leading to a continued buildup of finished product inventories in the mid-to-downstream sectors. Procurement remains strictly on an as-needed basis, with no bulk restocking; demand for commodity-grade DMC, standard raw rubber, and silicone oil continues to weaken, dragging down mainstream spot quotes.

High-growth emerging downstream sectors (market floor)

Orders for specialized silicone materials—used in liquid cooling for AI computing power, photovoltaic module sealing, new energy vehicle (NEV) battery potting, and semiconductor packaging—remain stable over the long term, with fixed-price long-term contracts insulating them from short-term seasonal fluctuations. Demand continues to surge for the high-end electronic and medical-grade silicone materials long cultivated by Elkem Silicones; supply for these high-end specialty silicones remains tight and prices firm, highlighting a significant divergence in market performance across product categories.

3. Price transmission logic between upstream and downstream

Upstream prices for silicon metal, methanol, and chloromethane have weakened in tandem on a monthly basis, lowering the composite production cost of silicones and theoretically creating room for price reductions. However, industry-wide production cuts and supply contraction have offset the bearish impact of falling raw material costs, resulting in a volatile market pattern characterized by "declining costs, tightening supply, and divergent demand."

Transmission characteristics: The decline in raw material prices exceeds that of commodity-grade silicones; high-end specialty silicones, driven by inelastic demand, show almost no price correlation with raw material drops, causing the price gap between product categories to widen continuously.

4. Intraday trading sentiment (June 29) Overall market inquiry volume is limited; traders of general-purpose silicone products are offering price concessions to clear inventory. Long-term contract orders for high-end products—such as those for new energy and electronics—are being fulfilled normally, though spot orders remain scarce. Regional price spreads remain stable; supply in major East China production hubs is relatively high, leading to lower quotes, while integrated bases in the Southwest are shipping at a steady pace and showing a stronger resolve to maintain price levels. Overall trading activity is subdued, with no significant surge in volume.

VI. Global Silicone Market Landscape

Overseas Markets

Europe and the Americas: Growth in local demand has slowed, and energy and environmental compliance costs remain high; the former Elkem Silicone facilities in these regions previously faced prolonged cost pressures. Following their integration into the Bluestar system, these overseas bases now serve local customers directly with nearby delivery, drastically reducing long-distance cross-regional cargo flows and lowering global logistics costs. There are no plans for new silicone production capacity in Europe or the Americas; these regions rely on long-term imports of general-purpose intermediates and specialty finished products from Asia.

Southeast Asia: Rapid expansion in photovoltaic and new energy production capacities has driven steady growth in silicone import demand. This region has become a stable destination for Chinese silicone products, with export orders providing a buffer for demand.

Supply Constraints: There are no plans for large-scale new silicone capacity overseas; future global supply growth will primarily come from domestic integrated facilities. Coupled with Bluestar’s integration of Elkem’s global channels, the domestic industry’s global pricing power continues to strengthen.

Domestic Market

China holds the world's largest production capacity, yet structural imbalances persist: there is overcapacity in low-to-mid-end general-purpose products, while high-end specialty silicone remains in short supply. Bluestar’s acquisition of Elkem Silicone addressed gaps in high-end technology and overseas distribution channels, accelerating the industry's structural consolidation. Regarding exports, competition for traditional general-purpose products is fierce; however, leveraging Elkem’s established overseas channels, high-end specialty silicones are commanding higher export premiums, leading to a continuously optimizing import-export structure.

VII. Phased Outlook for Future Market Trends

Industry-wide production cuts continue to be implemented, and supply contraction is providing a floor for prices; however, the traditional off-season for downstream demand has not yet ended. Prices for DMC and standard raw rubber remain in the 14,200–14,700 yuan/tonne range. Prices are fluctuating within a narrow range; supplies of high-end silicone products for the new energy and electronics sectors—leveraging the technology channels of the former Elkem Silicones—remain tight, keeping prices stable amidst a trend of market divergence across product categories.

Key variables: the rigor of industry-wide production cuts and the pace of inventory destocking in traditional downstream sectors.

Long-term rapid growth in AI, photovoltaics, and new energy vehicles is driving steady volume increases for high-end silicon materials, while traditional sectors continue to exhibit seasonal fluctuations.

Overall, the silicone market is maintaining a range-bound pattern for the year; general-purpose products are experiencing greater volatility, whereas the price baseline for high-end specialty silicon—leveraging the technological strengths of the former Elkem Silicones—continues to rise, narrowing the gap in technology and costs between domestic and international players.

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