As part of a major corporate overhaul, the silicone maker Momentive Performance Materials plans to shut its basic chemicals plant in Waterford, New York, leaving Dow as the only US producer of the key raw materials needed to produce silicone fluids, sealants, and elastomers.
Momentive says the shutdown will take place over 2 years, eliminating roughly 300 of its 1,000 employees in the Waterford region. At the same time, Momentive says it will spend $15 million to expand production of silicones for electronics in Waterford. And the company will sell Henkel its business in consumer sealants sold at hardware stores and home improvement centers. The consumer business has annual sales of about $120 million, roughly 5% of Momentive’s total sales.
The shutdown will also affect Evonik Industries, which produces fumed silica in Waterford using a by-product generated by Momentive. Evonik says it will “explore all options” for the silica facility, which employs about 30 people.
The Waterford plant was opened by General Electric in 1947. GE sold the silicone business in 2007 to the private equity firm Apollo Management, which renamed it Momentive. Following bankruptcy in 2014 and a stock offering in 2017, Momentive is now owned by a South Korean consortium.
For decades, GE and Dow’s Dow Corning joint venture dominated the silicone market in the US and worldwide, in part through the strength of their back-integration into basic raw materials. Silicone manufacturing starts by reacting silicon metal with methyl chloride to yield methylchlorosilanes, which are hydrolyzed and condensed into silicones.
But since the sale to Apollo, Momentive has been deemphasizing raw materials and high-volume basic silicones. In 2000, according to Ken Bruhnke, a long-time Dow Corning executive who now heads Silprime Consulting, GE had about 20% of global silicone raw materials capacity. Today, following the closure of facilities in Germany and Thailand, Momentive has just 5% of global capacity.
“They had a long-time goal to get out of the commodity side of the business,” Bruhnke says. Making the raw materials, he adds, “is very expensive, complex, and hazardous.”
As Momentive was moving out of basic chemicals, Chinese manufacturers were moving in. In 2000, Bruhnke says, China had essentially no silicones production. Today, the country has 45% of the world’s capacity. “It’s been a huge rise for China as a supplier, while Momentive has been going down, down, down,” he says.
In the US, Momentive will need to buy silicone raw materials in a market that at the moment is undersupplied and burdened by high tariffs on goods from China, Bruhnke says. The US imports about 15% of its silicone raw material requirements, a figure that will increase following the Waterford shutdown.
Given that the US silicone market continues to grow, Bruhnke sees an opportunity for another firm to build a grassroots silicone raw materials plant, a project that could cost upwards of $1 billion. Dow said in 2018 that it was studying the construction of such a plant somewhere in the world.