NEW YORK Brazils silicon industry has
significantly curtailed output as producers opt to sell power
back to the spot market instead of producing in a move some
speculate could eventually lead to higher silicon prices in the
A combination of slumping silicon prices and a dry winter has
led a number of Brazilian producers to turn off capacity,
choosing instead to sell their power back to other consumers,
Depending on how much rain Brazil gets in the next few months,
this trend could continue into early next year and push U.S.
silicon prices up by curbing imports, market players speculate.
U.S. prices are currently at two-year lows of $1.25 to $1.30
At least three Brazilian silicon producers have significantly
cut production, sources told AMM. Rima Industrial SA,
which has a capacity of 65,000 tonnes per year, is running
about 43 percent of its total production, a source familiar
with the operation told AMM. Ligas de Aluminio SA (Liasa) and
Cia Ferroligas Minas Gerais (Minasligas) have also shut a
significant amount of their production, other participants
A Rima spokesman declined to comment, while Liasa and
Minasligas did not respond to requests for comment. All three
companies are based in the southeastern city of Belo Horizonte.
Sources said a lack of rainfall is behind the situation in
Brazil, a country that largely relies on hydropower. After a
dry winter, many of the dams in central Brazil are dried up,
which means that energy prices have skyrocketed, sources
The cost of the energy is so high right now. (Utilities)
cannot generate as much energy from the dams because the level
of the water in the dams is so low, a source familiar
with the situation told AMM.
In Brazil, companies can take their contracted power and sell
it to the open spot market, and given todays low silicon
prices, many have made that choice.
Brazilian silicon producers can go to the market and sell
at the spot market price without getting permission from the
electric company, the source said. So right now,
instead of producing silicon, producers are selling energy into
the market at about five times the cost of what theyre
paying for energy on contract.
Its a much better scenario to sell the
energy, the source added. First, (they) can sell it
for much more than theyre buying it. Second, the current
market price for silicon is awful.
Jeff Bradley, chief executive officer of New York-based Globe
Specialty Metals Inc., confirmed the trend.
Theyre making more money right now shut down and
selling back to the grid, he told AMM on the
sidelines at Dahlman Rose & Co.s third annual Global
Metals, Mining & Materials Conference in New York.
Brazilian silicon producers are curtailed due to power
constraints, and they are getting paid handsomely, a
second source agreed.
Its unclear how long the producers will operate at
limited silicon production, although some speculate it could
last for the next two to three months.
We dont know when. Its directly related to
the spot price of energy in Brazil. (But) even when its
raining, it takes a couple of months for the levels to come
back, the first source said. Its raining now
(in Brazil), but even if it keeps raining through November and
December, the situation will persist until the beginning of
Sources say that all three producers currently have enough
inventory on hand to supply customers, but if the trend
continues, some speculate it could lead to a change in dynamics
in the United States.
I cant predict how fast, but it will definitely
have an impact on pricing. There is no doubt in my mind,
the first source said.
I hope prices rise, Bradley added.
Brazil has shipped a significant amount of metal to the United
States this year. The United States imported 6,724 tonnes of
Brazilian silicon in September, up sharply from 2,423 tonnes in
August and 4,832 tonnes in September 2011, data from the U.S.
International Trade Commission shows.