Capacity Expansion and Industrial Upgrades – China’s HCSO Market Enters a New Peak Production Cycle in 2026


      As the global silicones industry accelerates its shift toward China, the domestic hydrogen-containing silicone oil (HCSO) sector has witnessed an unprecedented wave of new capacity announcements in early 2026. Moving beyond basic raw material supply, the industry is rapidly transitioning toward high-value, functionally specialized products.
      Entering the second quarter of 2026, China’s hydrogen-containing silicone oil market is showing unprecedented vitality. Driven by recovering demand from downstream textile waterproofing, construction material treatment, and new energy sectors, multiple leading enterprises have launched expansion projects, pushing total national capacity toward a record high this year.
      A major production base in northern China recently announced progress on its second-phase high-performance organosilicon polymer project. With a total investment of RMB 1.2 billion, the facility is planned to include a 10,000-tonne-per-year HCSO production unit equipped with advanced closed-loop separation systems. The project manager noted that the new line will adopt a continuous, automated production process distinct from traditional batch methods, significantly improving the purity and consistency of hydrogen-terminated HCSO. This project fills a regional gap for high-hydrogen-content silicone oils and signals a shift from extensive expansion to refined, chain-based development.
      Meanwhile, a publicly-listed company in East China released a convertible bond raising plan in late March, targeting RMB 370 million to enhance its high-end organosilicon new materials segment. According to the announcement, the funded project will add 18,890 tonnes per year of modified silicone oil capacity, including 3,390 tonnes of terminal hydrogen-containing silicone oil. The terminal product is aimed at high-end cosmetics and electronic chemicals, challenging foreign dominance in specialized high-viscosity, high-reactivity HCSO markets.
      On the export front, 2026 is both challenging and opportunistic. Since April 1, 2026, the 13% export rebate for primary-shaped polysiloxanes (including HCSO) has been officially eliminated. This policy change immediately added approximately RMB 1,600 per tonne in export costs. Leading domestic enterprises are responding by upgrading purification technologies and pursuing product differentiation. For the mainstream product range of 1.5-1.6% hydrogen content—which accounts for 81% of the global market—local producers are optimizing processes to maintain pricing power in international markets.
      Market research from QYResearch indicates that the global HCSO market reached USD 467 million in 2025, with China accounting for approximately 36% of sales, making it the world’s largest single market. Facing intensified international competition, Chinese companies are adopting a two-pronged strategy: leveraging low-cost energy regions like Inner Mongolia and Sichuan to maintain cost advantages, while developing high-purity grades for crosslinkers and silicone intermediates to replace imports.
      Industry experts note that under China’s “dual carbon” goals, new HCSO facilities are increasingly adopting closed-loop systems and heat recovery technologies to maximize material utilization and meet emission standards. After early-stage disorderly growth, China’s HCSO industry is now entering a critical transition period toward high-quality development.