Silicon Carbide & More

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1 Silicon Carbide & More What s going on in silicon carbide, fused alumina & other minerals #22 March 2008 By Paul Harris Energy issues delay Elfusa SiC plans An energy shortage in Brazil is preventing the potential development of silicon carbide production by fused minerals producer Elfusa, technical director Leonardo Curimbaba told SiC & More. The company has looked at expanding into SiC production to be able to supply a full range of fused minerals and it has a source of high purity quartz. However, the decision to invest has been delayed as the company has been unable to obtain guarantees for energy supply due to a lack of investment in generation capacity. Brazil is growing by % a year but the government has not invested in power supply, and this is now a real concern, said Curimbaba. At a recent meeting with a power company, the company learned that the forecasts for power generation mean that there is unlikely to be enough power supply available for a silicon carbide production facility for at least five years due to environmental regulations that are making it increasingly difficult to develop hydropower generation projects. Brazil is going to have to follow a path of thermal power generation using gas, he said. We are producing at about 95% of capacity as we have a strong domestic market, where growth has been strong in the refractory market Micro Elfusa is currently producing tpm of fused alumina micro grits following expansion of its João da Boa Vista plant that began micro production in Investment since 2006 has increased production capacity by 30-40%, with abrasive products mainly sold in Brazil, although some are exported to the US. Strong market fundamentals mean the company is producing at close to its fused alumina production capacity of 100, ,000 tpy, of which about 70% is brown fused alumina and 30% white fused alumina. We are producing at about 95% of capacity as we have a strong domestic market, where growth has been strong in the refractory market, said Curimbaba due to difficulties of obtaining material from China and increased steel production. Brazilian steel production was 34 Mt in 2007 and is forecast to be 37 Mt in 2008 and 54Mt in Prices have yet to increase substantially as Chinese material is still entering Brazil. We have to be careful about price as China is still knocking on Brazil s door. If Chinese prices increase we can follow them, he said. Production of a red coated BFA product launched in 2005 for resin-bonded grinding wheels is now 100 tpm. SiC SUPPLY NEWS Africa Sublime upgrades furnaces Sublime Technologies brought its second furnace group on line in December 2007, which is now running near capacity at 16 MW. The new line increases the operations production capacity to 25,000 metric tpy of SiC. While the operation of this second furnace group was being fine tuned in January and February, Sublime made improvements to the first furnace group to be completed in March, following which it will operate at full capacity. Despite tightness in power suppliy in South Africa, Sublime is believed to have sufficient energy to operate both of its furnace lines at full capacity. The company has a 40 MVA power allocation and, like virtually every other SiC furnace plant in the world, has an interruptible power agreement with its local power utility. Meanwhile, South African power giant Eskom is investing over $13.6 billion to build new power plants and expand existing ones, including bringing some out of mothballs, in addition to investment in upgrading transmission and distribution capabilities. Europe Navarro starts 2008 in sold out position Spanish SiC producer Navarro Page 1

2 Pig iron, chromium, manganese and coke By George O Malley Pig iron prices have increased significantly to over $500 per long ton delivered in the Pittsburgh or Chicago area. While some of this pricing can be attributed to the weak US dollar, steel mills are operating at near 90% capacity which is also driving prices higher, and some mills report that they cannot fill all the orders they are receiving. In this environment, scrap prices are fluctuating within a narrow band and are likely to trend slightly higher as the second quarter begins. Manganese and chromium prices are moving into new ground beyond their historical record prices as severe snow storms in China virtually shut down large sections of the country. The Chinese government has reported major problems providing coal to power plants, which has caused electrical shortages and outages affecting producers, although official government information may understate the seriousness of the power situation. The end result is that alloy production and transportation has been affected. China is not the only country to experience problems with power supply as South Africa is having severe problems with its power distribution grid, leading has started 2008 as 2007 left off, in a sold out position. Add to this that prices in Europe have increased 20-30% depending on market segment since late 2007, and with more price increases to come before the third quarter, and the company s difficulty in exporting to the US South Africa is having severe problems with its power distribution grid, leading chromium producers in the country to declare force majeure for exchange rate reasons seems less important. Navarro began operating a SiC powders pilot plant several years ago and has incrementally increased the capacity of this oepration to production levels of over 1,600 metric tpy. In addition to weathering the chromium producers in the country to declare force majeure on shipments due to power shortages. Some forecasts coming out of South Africa, where the grid has suffered years of neglect and under investment, indicate that the power grid may not be up to standard for several years. In practical terms, this means that there is some supply of high carbon ferrochromium available at very high prices of $1.75/lb Cr, but low carbon grades are, in most cases, not available at any price. High carbon ferromanganese is currently selling at over $2,000/long ton, and is currently quoted at $2,125/long ton. Demand for this material is high and supply limited creating market conditions that sustain higher prices, and so no relief is expected until later this year. The supply of foundry coke remains tight following automaker Ford s decision to keep its large Brookpark, OH iron foundry in operation and with US Pipe to build a new cupola shop in Birmingham, AL. If Ford shuts down Brookpark as Birmingham comes on line, coke supply should stay in balance. If not, coke supply is likely to be a real problem. SiC storms that have afflicted SiC producers over the last 15 years, Navarro has had the foresight to enter the powders business and compete in the high-end portion of the SiC value chain, and it can be expected that the development of its powders business will continue. Navarro has furnace capacity to produce over 20,000 metric tpy of SiC from its Spanish operations in Mansilla de las Mulas and Vadillo, which is located in some of the world s most beautiful countryside and is supplied by hydro electricity from its own plant. The company began production in the 1950 s under license from the Carborundum Company. Asia Abasic 30,000 tpy SiC Iranian SiC producer Abasic is believed to have production and processing capacity of 30,000 metric tpy of at its Abadan silicon carbide and aluminum oxide Complex and some 18,000 tpy of aluminum oxide capacity, rather than the 48,000 metric tpy reported in SiC & More #21. Abasic, certified to ISO standards, processes grits to FEPA and DIN 6901 standards and offers SiC for most major end-use markets including, metallurgy, refractory, bonded abrasives, wire saw and anti-slip materials. Strategically located near the port of Abadan and with excellent access to both the Persian Gulf and a rail network, Abasic is one of the world s newest SiC furnace plants. Americas Schott to build solar PV cell facility Schott Solar Inc is to build a $100 million new solar energy technology production facility near Albuquerque, NM. Schott is erecting a 200,000 ft2 facility to manufacture receivers for concentrated solar thermal power plans and 64 MW photovoltaic (PV) modules. Across the world, demand for Page 2

3 renewable energy is growing. The Schott facility comes as experts believe that demand for PV will grow by 100% over the next 3-5 years. The long term plans for Schott s New Mexico operation include as many as 1,500 employees and 800,000 ft2 of facilities. This development is good news for SiC microgrit producers as increased demand for PV and diesel particulate filter (DPF) products will continue encourage productivity improvements and expansions by SIC microgrit producers such as St. Gobain, ESK-SiC, Washington Mills, Navarro Nanko, Fujimi, and Shimano. Green SiC price soars The price of green SiC continues to soar, with a US bonded abrasives producer revealling what amounts to a 30 /lb ($600 n/t) increase in less than 18 months for FEPA graded material. Pricing in the US has increased from about 60 /lb ($1,200 n/t) about 18 months ago to 90 /lb ($1,800 n/t) in January Pricing will continue increasing in 2008 as sources in India and Europe confirm that these price levels are the going rate for green SiC FEPA grits. Chinese prices rose sharply from the second half year in 2007, with a speed of US$100/t per month. The source received the offers for shipment in March also climbed to US$1,900/t CIF, reported Asian Metals. Another bonded abrasives producer said its sales staff will put less emphasis on selling green wheels. It s more a function of cosmetics and not performance, the source told SiC & More regading the use of green SiC instead of black. US SiC exports In 2007, 9,016 metric tons of sized SiC were exported from the US. Of that total, 74% went to Canada, 10.6% to Mexico, 5.9% to Japan with the balance going to a basket of over 28 countries. Regarding crude SiC, 10,316 metric tons were exported with Norway taking the lion s share at 9,261 metric tons, some 90% of the total. Japan accounted for 438 m/t and Mexico 408 m/t. Compared to 2006, refined exports fell 2,431 m/t or 21% in However, crude SiC exports increased by 651 m/t or 6.7% in 2007 compared to An even more dramatic difference can be seen when comparing 2007 crude exports to 2005, with an increase of 3,702 m/t or 56%. US SiC imports China is returning to be the dominant source of SiC imports to the US as the weak US dollar reduces supplies from other global sources. China accounted for 88% of SiC imports in 2007, up from 82% in When the yuan tracked the US dollar, it was attractive for Chinese companies to sell their product in the US. However, with the recent strength of the yuan against the dollar, that is no longer the case. Dependence on Chinese refined SiC is not as pronounced as for crude material. China represented only 40% of all refined imports in 2006 and In 2004 it was 37.8% while in 2005 only 29.7%. China is expected to represent nearly 90% of all SiC crude imports and about 40% of all refined into the US in Just four years ago it appeared as if US SiC importers might finally be able to break away from what appeared to be complete dependence on Chinese SiC which peaked in 2002 when 95% of all imports were from China. During 2003, Chinese imports fell to 74% of the total, and the 2004 global SiC shortage saw this dependence shrink to 56%, its lowest level since With a SiC shortage in 2004 and 2005, prices in the US began to increase to the point that other foreign producers found the US market attractive. However, the weak dollar in 2006, Brazilian, Dutch, Romanian, Russian, and Venezuelan SiC started going elsewhere despite higher US prices, leading to a return to dependence on Chinese SiC. Interestingly, Vietnam continues to increase its SiC exports to the US. Up until 2004, not one ton of Vietnamese SiC had been imported into the US, but in 2004 the total refined SiC imported from Vietnam was 1,166 m/t; ,958 m/t; ,450 m/t; and in 2007 the total was an astonishing 5,704 m/t. However, Piers detail reports do not reveal any material originating in Vietnam causing some confusion. If any reader knows what is occurring in Vietnam, please contact us at SiC & More. Alox US Imports Due to the lack of aluminum oxide (alox) furnacing capability in North America, imports of alox crude have increased to record levels. During 2007, 192,826 metric tons of alox were imported into the US, second only to the record set in 2005 with 197,612 m/t. While the US market has always been dependent on foreign alox, the majority of these used to be Canadian material. In 1988, for example, of the 127,068 tons of alox imported into the US, 126,068 came from Canada, and US companies had Canadian affiliates that furnaced material and shipped crude to the US for processing. However, the high cost of power in North America, the cost of importing bauxite feedstock and the relatively low cost of imports (up until 2007) led to the closing of virtually all North American alox fusion capacity, creating a near total dependence on imports from non-affiliates. The closing of North American fusion operations brought increased dependence on Chinese alox. In fact, in 2007, China represented 83.7% of all crude alox imports, accorindg to Piers data. This data may not tell the whole story as the harmonized import codes for alox can cause confusion when calculating imports. For example, in 2006 and 2007 there were no imports of crude alox from Brazil and a two-year total of just 265 m/t of refined material. With Brazilian alox giant Elfusa owning a US subsidiary processing and distribution network, it is unlikely that these numbers are accurate. Either way, the 2007 crude alox import breakdown is heavily skewed toward China. Of 192,826 m/t of alox, 161,493 m/t came from China; 19,781 m/t from Venezuela (white); 6,418 m/t from Canada; 3,888 m/t from Guyana (refractory grade bauxite); and 962 m/t from Russia (white). Regarding Refined alox, 19 countries contributed to the 12,859 m/t of imports. Austria Page 3

4 led the way 3,796 m/t; 3,732 m/t from Canada; 1,817 m/t from Italy; 1,053 m/t from France; and various others. White alox price falls It appears as if every mineral from China is soaring in price with the exception of white alox, where prices have actually lowered. Pricing across the world was flat while in China there was actually some downward price pressure, a trader told SiC & More. BFA Antidumping duties Several US companies are organizing to fight the extension of the antidumping duties imposed against refined BFA from China in November The dumping order published in the Federal Register called for a dumping margin of % on pulverized or refined brown artificial corundum, also known as refined brown aluminum oxide or brown fused alumina, in grit size of 3/8 inch or less. These antidumping duties provided the impetus for the creation of at least four new US BFA processors including GMA, Illinois Valley Minerals, Kadir, and Elfusa. It is unlikely that those organizing against the extension will garner enough support to fight the growing base of US companies that have invested in crude BFA processing facilities, and the extension can be expected as there are more companies that would be materially injured by refined imports from China than five years ago. BFA prices to climb The supply and price situation regarding Chinese BFA continues to tighten. Global BFA pricing remained stable during the Chinese new year holiday in February, but as the celebration ended, talk of price increases resumed. The price of bauxite, the key raw material for producing BFA, increased by $12/metric ton in one day. The supply of bauxite is tight right now and that is expected to continue throughout 2008, a trader told SiC & More. Electricity has been in short supply in China for a variety of reasons but the worse winter in 50 years has had catastrophic effects on power supply. Several BFA plants in Henan Province were without power for days due to the storms and several utility companies are thought to have less than three or four days of coal available, with rail and motor freight transportation severely hampered by the snow. The problems at the power plant level are certain to increase our kwh price, a BFA plant manager told SiC & More. There is also the issue of inventory. Going into the Chinese new year holiday, BFA furnace plants had little or no inventory. After the holiday, Chinese BFA producers discovered that orders had backed up, they had no inventory and could not purchase enough bauxite to meet shipments. This does not bode well for the global BFA industry. Pricing recently hit $650/net ton FOB NOLA for BFA crude. That is 32.5 /lb before the raw material has even begun its journey to a US processor. Just five short years ago Chinese refined BFA for abrasive applications sold for 18 /lb in the US. Before summer, North American end users in the abrasive trade can expect to see pricing in the /lb range. Pricing through the second quarter will be based on crude material currently in transit from China. Price pressure on BFA crude over the next few months will be due to bauxite, power, exchange rate and/or transportation and will effect end-use market pricing in the third quarter. It is probable that BFA pricing will experience upward price pressure thoughout 2008 into As much of this stems from the cost of bauxite, furnacing BFA in the Western Hemisphere will not be much of an option during this time. Other Ferroalloys commentry Ferro silicon (FeSi) pricing continues its march towards $1.00/lb per contained Si unit, a level that if anyone had even whispered 12 months ago, most people in the industry would have considered impossible. However, for over a year SiC & More s George O Malley has forecast that FeSi pricing would approach the $1.00/lb threshold, a bold forecast when prices were 60 /lb. As SiC & More goes to press, 50% lump FeSi is priced at over 90 /lb. What is the price outlook going forward? There are a number of reasons for the unprecedented price pressure on all ferroalloys. China is producing record amounts of iron and steel, and continues to consume its own raw materials at a quickening pace leaving fewer for export. To ensure that materials are available for domestic industries, the Chinese government has increased the export tax on ferroalloys to curb exports in The Chinese government reported that in the first three quarters of 2007 exports of ferroalloys had increased 50% over the same period in 2006, so restrictions were inevitable. Energy issues are also having an impact on China s ferroalloy producers as power utilities found themselves short of coal and had to cut off heavy industry in favor of retail consumers during the recent severe winter storms. When iron and steel buyers sense an immenent shortage, they hedge their bets and buy material to build inventory that further exacerbates an already difficult supply situation. This is the case as US raw steel production hit a three-year high due to a weak dollar and reduced imports. This pricing issue is not going away anytime soon. In fact, the rumored shutdown of outdated ferroalloy plants in China means global pricing will continue to climb, with one source insisting that the government will close over 500,000 tons of ferroalloy capacity by the end of One can only guess where prices will go if that happens. Graphite Graphite prices will continue rising due to a global shortage of needle coke, increasing energy costs and strong demand for graphite electrodes. Origin Lot size Rate/metric ton Brazil 10,000 mt $39-46/mt China (north) Any bulk cargo $68-74/mt China (south) Any bulk cargo $75-85/mt India 5,000 10,000 mt $70-75/mt Russia Small bulk 3,000 ton $80-85/mt Russia Large bulk 20,000 ton $74-78/mt Page 4

5 Fused mineral pricing Western Europe SiC 88-92% Metallurgical (EU Producers) % Metallurgical (Russia) SiC unavailable 90% Refractory; Typical Sizes % Refractory; Typical Sizes 990-1, % Refractory: Typical Sizes 1,100-1,600 98% FEPA F8-F220 1,050-1,380 98% FEPA Green F8-F220 1,590-2,360 Middle Europe SiC 88-92% Metallurgical (Russia) N/a 88-92% Metallurgical (Romania) % FEPA F12-F % FEPA F100-F % Refractory, Typical Splits % Black 320 (Czech) 1,330-1,400 98% Black 500 & 600 (Czech) N/a Middle Europe Alox 8-46 Grit Bonded Abrasive (Ukraine) N/a Grit Bonded Abrasive (Ukraine) N/a WAO F12-F150 Bonded (Czech) 720 WAO F12-F150 Bonded (Hungary) WAO Refractory, Typical split (Hungary) Notes USA SiC & Al2O3 FOB New Orleans 90% Metallurgical SiC $ % Crude SiC (Russia) SiC unavailable 97% Crude SiC (China - Pet Coke) $1,350 97% Crude SiC (China - Anthracite) $975 Al2O3 crude (China) bulk $655 USA Other SiC 97% (Russia) $1,180-1,260 97% (Russia) $1,200-1,400 97% 180 & 220 (Russia) SiC unavailable 97% Refractory, Hi Fe (China) $1,050-1,150 97% Refractory, Low Fe (China) $1,100-1,200 97% ANSI Grit (PNAM) (FOB SP) $1,300-1,400 97% ANSI Grit (PNAM) (FOB SP)$1, Brown Al2O3 (PNAM) FOB SP ANSI ANSI 80 ANSI ANSI 120, 150, 180 ANSI 220 $ $ $ $ $840-$940 Prices ex-works, dry sieve per metric ton, except USA which are net tons. Chinese SiC 52.6% anti-dumping duty in EU. RoC = Run of Crusher. PNAM = Processed North America, SP = Shipping Point. WAO = White Aluminum Oxide. Price information has been obtained through contact with sources engaged in the trade of silicon carbide. Actual transaction prices will be determined by a host of factors, including, but not exclusive to, quantity, grades, contract terms and various other factors. Price information sources are deemed to be reliable but due to the possibility of error by Silicon Carbide & More, or others, Silicon Carbide & More does not guarantee the accuracy, adequacy or results obtained from the use of such information. All price information 2008 by Silicon Carbide & More Inc. PRICE NEWS Pricing leaps Prices for all SiC products continue to increase, but when will the increases stop? For metallurgical products, SiC prices will increase as long as FeSi prices increase. With FeSi approaching $1.00/lb, 90% SiC grain prices may rise to nearly $1,000/net ton. Abrasives producers can expect higher prices with each passing month as the availability of high quality SiC for traditional abrasives is decreasing due to a lack of high quality raw materials to produce abrasive quality #1 grade SiC, in particular the carbon source. Powders prices will continue to increase but growing production capacity will help stabilize them, except for green SiC where pricing continues to be extraordinarily volatile as they provoke inventory building by Chinese producers. Prices will continue to increase throughout 2008 and into Added capacity is expected to come on line by several SiC producers in from mid 2008 through early 2009 with two new and large SiC furnace plants under construction in China. Silicon Carbide & More Publisher: Kormac Kennedy Editor: Paul Harris Copyright information Copyright 2008 by Silicon Carbide & More Inc. All rights reserved. Information contained in Silicon Carbide & More may not be redistributed, reproduced or put into an information retrieval system without prior written permission. Subscriptions $350 per year for a single user; $450 per year for a multiple-user company subscription. For more information call , fax or kormackennedy@aol.com.silicon Carbide & More, PO Box 503, Glen Ellyn, IL Information contained in Silicon Carbide & More has been obtained from sources believed to be reliable but due to the possibility of error by Silicon Carbide & More, or others, Silicon Carbide & More does not guarantee the accuracy, adequacy or results obtained from the use of such information. Silicon Carbide & More is published five-ten times per year. SiC Feedback & News line Our staff is dedicated to seeking out the information you need to stay on the leading edge of silicon carbide and related businesses. Please industry news, press releases or details of other events of note to us at the address below. If there are specific supply issues or topics that you would like to see discussed in future issues of Silicon Carbide & More, please your ideas to us at: kormackennedy@aol.com Page 5