Developments in the silicon metal market

Transcription

1 Developments in the silicon metal market Kevin Fowkes Managing Consultant Argus European Light Metals Conference Dusseldorf, 4 th November 2015

2 The ups and downs of the solar industry have driven silicon metal demand trends since 2009 solar is in a strong growth phase once more 3 2 World silicon metal consumption by end-use sector (Mt) First solar boom Solar depression Solar growth resumes Solar & semiconductors Silicones 1 Aluminium 0 Source: AlloyConsult

3 Though the growth of solar has been the big story of the past 10 years, aluminium and silicones remain the largest end-uses for silicon metal 60% Share of world silicon metal consumption by end-use sector (%) 59% 52% 37% Aluminium 30% Silicones 31% Solar & semiconductors 16% 3% 0% Source: AlloyConsult

4 Aluminium production has outpaced silicon metal consumption in aluminium despite a declining silicon scrap usage rate 240 Index (2000=100) 30% % of silicon in global aluminium production deriving from scrap World aluminium production (CAGR=5.8%) 20% World consumption of silicon metal in aluminium (CAGR=4.5%) 10% Linear regression trend line 80 0% Source: AlloyConsult, World Aluminium

5 The transport sector accounts for about 60% of the silicon metal used in aluminium Division of aluminium alloys by sector and type Silicon metal used in aluminium by estimated end-use 100% 75% 50% 25% 0% Transport alloys Nontransport alloys China Mill products 39% (avg 0.5% Si) China Cast products (avg 8% Si) NON- TRANSPORT (Machinery, consumer durbs, electrical, construction etc) TRANS- PORT (Other) TRANSPORT (Motor vehicles) Source: AlloyConsult, Roskill

6 Permissable CO 2 emissions from vehicles will decline substantially in the next 10 years, especially in regions where limits are less strict at present Permissable CO 2 emissions from passenger cars (g CO 2 per car per km) EU Japan USA China The EU and Japan have so far led the world in terms of automotive fuel efficiency / CO 2 emission standards Over the next 10 years, standards in China and the USA will become much more strict, and will close the gap with the EU and Japan Lower CO 2 emissions requires greater fuel efficiency, which requires a lighter automobile Other pressures on automakers add weight to cars eg. greater crash resistance & better specification Using lighter materials with same strength is the best solution (good for aluminium, bad for iron & mild carbon steels) Source: Roskill, ICCT

7 The average aluminium content of a European car has nearly tripled since 1990, and will rise by a further 15-30% by Average aluminium content of cars produced in Europe (kg per car) High case Low case Aluminium s superior strengthto-weight ratio makes it more effective for building fuelefficient cars than steel or iron Main disadvantage of aluminium is higher cost but legislation forces auto makers to act Average aluminium content of European-produced cars has nearly tripled since 1990 There will be a further increase of 15-30% by 2020, and faster increases in other regions Automotive-related alloys account for the highest amount of silicon used in aluminium Source: Roskill, European Aluminium Association

8 Silicone consumption is driven by disposable income significant growth potential exists from developing countries growing their middle class World silicone consumption by end-use (value basis) China Extremely wide array of consuming sectors; approx 10,000 individual applications more constantly being developed Many are driven by consumer disposable income (eg. beauty, health, home renovation) most consumption still in west, but substantial growth potential from developing countries building a bigger and richer middle class (especially China) Construction & renovation Health & medicine Energy & electronics Textiles Other Chemical industry Automotive Plastics Paper Complex upstream & downstream production process silicon metal most important raw material (approx 0.5kg/t of silicone) Source: Roskill

9 The silicone industry is highly consolidated, with the top 5 producers accounting for approx. 85% of world output World silicone production by company (value basis) World silicone production is extremely consolidated the top 5 producers control approx. 85% of world output Others BlueStar Shin Etsu Momentive China Dow Corning Wacker Until recent years, most upstream capacity was in US, Europe & Japan, with developing world largely served from exports Massive investment in integrated silicone plants in China in recent years much of it JVs with big 5 Increased efforts to integrate upstream into silicon metal production over past 15 years (DC, Holla, Simcoa, Elkem-BS) Source: Wacker Factbook, Roskill

10 The solar sector now seems to be following a more sustainable growth path, with massive growth potential over the coming decades World polysilicon production (kt) +71% +67% +60% +50% -8% +5% +8% +11% The solar sector has returned to growth following the solar depression of Growth in demand now more driven by unsubsidised PV installations, mostly in Asia. As such, growth is therefore likely to be more sustainable and less volatile than in the past Growth of ~10%pa expected over the long term, requiring hundreds of thousands of tonnes of extra silicon (stark contrast with flat demand outlook for steel) Source: AlloyConsult, Viridis IQ

11 World silicon metal production is expected to decline slightly to reach 2.54 Mt in 2015, with China now accounting for 65% of global output 3 World silicon metal production (Mt) Other Germany Spain 2 Canada S.Africa Thailand Russia Australia 1 65% France USA 0 29% 46% 56% Brazil Norway China Source: AlloyConsult

12 Unlike most ferroalloys, China s rising silicon metal output has been export-driven in recent years, though exports have fallen slightly in ,800 Chinese silicon metal production (kt) 1,200 Exports 600 Domestic sales 0 Source: AlloyConsult

13 Chinese exports almost doubled from 2012 to Though exports have fallen slightly in 2015, exports to Japan and Europe have continued to rise Chinese silicon metal exports (kt) Cancellation of export tax (1 st Jan 2013) Other 600 Middle East 500 Europe 400 Other Asia S.Korea 100 Japan 0 Source: AlloyConsult

14 Outside of China, the main development in silicon metal production has been reduced Brazilian output, due to electricity shortages 300 Silicon metal production (kt) Brazilian output has halved since 2011, due to electricity shortages 200 Brazil USA Norway Following expiry of long-term power contracts at end-2014, many producers were unable to secure competitively priced power, and idled their production Higher output in Norway, partly due to furnace conversion from FeSi % 46% France New furnace in Australia, on-stream 64% since % Overall, non-chinese output has been broadly stable for 15 years New projects proposed in Canada and Iceland Source: AlloyConsult

15 Many silicon metal plants in Brazil are in the southern state of Minas Gerais, where the electricity situation has been particularly bad Location of main silicon metal and FeSi plants in Brazil: In Para: CCM (Dow Corning) In Bahia: Ferbasa In Minas Gerais: CBCC (Dow Corning) RIMA Capitao Eneas RIMA Varzea da Palma Minasligas LIASA Nova Era Italmagnesio Bozel

16 Summary of recent developments in Brazil The impact of the electricity shortages has been very uneven across Brazilian producers in 2015 Northern plants have been producing at close to normal levels whilst most capacity in Minas Gerais has been idle; in essence Dow Corning has been least impacted whilst most smaller producers have been badly affected Ferroalloy plants in northern Brazil negotiated favourable power contracts in mid-2015 lasting into the 2030s, average tariff in USD lower than in 2014 due to weak local currency Plants in Minas Gerais reported to be in the midst of negotiating new power agreements. Some production likely to return in Q4-2015, though dependent on the state of the market Brazilian output in 2016 highly likely to increase relative to 2015

17 Proposed Globe-Ferroatlantica merger: Summary of publicly-released information New company has estimated value of US$3.1bn Transaction expected to close in Q New company to be headquartered in London, listed in New York To be led by Alan Kestanbaum (Globe executive chairman); Joint CEOs will be Jeff Bradley (Globe CEO) and Pedro Larrea Paguaga (Ferroatlantica chairman and CEO) Expected cost savings of US$65M per year; debt expected to fall by US$30M over 3 years and cash flow to improve by US$100M (more efficient management of working capital and other efficiency savings) Approved by shareholders of Globe Specialty Metals in Sep 2015; still subject to approval by regulators in relevant jurisdictions

18 The proposed merged company s silicon metal capacity would be twice that of the second-largest producer World top-10 silicon metal producers by capacity (kt) Ferroatlantica + Globe Ferroatlantica BlueStar / Elkem Dow Corning Hubei Sanxin Gansu Sanxin Xinjiang Hesheng Guizhou Shibing Hengsheng Globe Specialty Metals Ferroatlantica already world s biggest producer of silicon metal Globe currently world s 8 th biggest producer (3 rd largest non-chinese owned producer) New company will have silicon metal capacity approx. twice the size of the second largest producer Zhejiang Kaihua Yuantong Silicon Maoxian Panda Silicon Source: Roskill

19 The merged company s biggest impact on silicon metal market share will be in the USA Estimated silicon metal market share by supplier (2014) 100% 75% Others Chinese 50% 15% Ferroatlantica 25% 8% 11% 30% 41% Globe 0% 6% 8% 2% World World exc. China EU USA Source: AlloyConsult

20 Silicon metal anti-dumping update EU anti-dumping duties against Chinese silicon metal expire in 2015, and the investigation into their potential renewal is at an advanced stage US anti dumping duties against Russian and Chinese silicon metal are not (ordinarily) scheduled for review until 2017/18 AD duties on Chinese silicon metal also in place in Canada and Australia

21 Silicon metal spot prices 10 year history 4,000 Silicon metal spot prices (US$/t) 3,500 3,000 2,500 2,000 1,500 1,000 EU USA China export 500 Source: AlloyConsult

22 Silicon metal spot price premiums 10 year history 120% 100% EU vs China US vs China US vs EU 80% 60% 40% 20% 0% -20% Source: AlloyConsult

23 Silicon metal prices have significantly outperformed Mn alloys & FeCr since 2008, and have maintained a very close correlation with FeSi 180 European bulk ferroalloy prices (Index, Jan 2008=100) Si metal FeSi SiMn HC FeMn HC FeCr 20 Source: AlloyConsult

24 Silicon metal production costs are driven by electricity and reductant costs.average cash costs have declined significantly in % Ex-plant cash costs by component (2015) 350 Silicon metal cash costs by component (Index, 2000=100) % % % 100 0% Si metal (global avg) Si metal (Europe) Si metal (Brazil) Si metal (China) Labour & other Quartz Electrodes Reductants Electricity 50 Electricity Reductants Labour Electrodes Quartz Total cash cost Source: AlloyConsult

25 The level of Chinese silicon metal prices is increasingly being set by the average cash production cost 3,000 2,000 US$/t commodities boom Solar boom Average cash cost, China (ex plant) Average cash cost +10% 1,000 Chinese silicon metal price (CIF Japan basis) 0 Export tax rebates Source: AlloyConsult

26 Thank you for your attention