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Globe expects silicon prices to increase

Keywords: Tags  Globe Specialty Metals, Jeff Bradley, Malcolm Appelbaum, silicon, silica, silica fume, prices, maintenance outages outlook

CHICAGO — Globe Specialty Metals Inc. expects prices to increase in 2013 thanks to improved demand from a host of sectors, including automotive, construction, steel, consumer goods, solar, and oil and gas.

The New York-based silicon metal producer has increased its inventories in anticipation of higher prices in the future, company executives said during a conference call following the release of earnings Feb. 8.

“In anticipation of a stronger pricing environment in 2013, we passed on some lower-priced, below-market business presented at the end of the year (2012),” chief executive officer Jeff Bradley said. “We have done this in past years at the end of the pricing season only to realize better returns in the following year.”

For calendar year 2013, Globe has contracted approximately 80 percent of its silicon metal and silicon alloy capacity to annual fixed prices, quarterly contracts or business tied to indices, Bradley said. “We have left room for spot business,” he said.

Pressed by an analyst on where current prices were, Bradley cited industry publication figures in the low $1.20s per pound. But he also noted that Globe’s aggregate business of both fixed price and index business were, in aggregate, above current published prices, which is why he said the company decided to leave more room for spot business.

Globe reported a $10.7-million increase in inventory for its fiscal second-quarter 2013.

Shipments decreased in the second quarter ended December 31 compared to the first in part because of the timing of contractual business, but also due to the “modest” inventory build, chief financial officer Malcolm Appelbaum said.

On the production front, Globe expects to produce 110,000 tonnes of silicon metal and 120,000 tonnes of silicon alloy in 2013, Appelbaum said. The company has scheduled three maintenance outages in its fiscal third quarter and three for its fiscal fourth quarter. They are expected to reduce production by 2,000 tonnes in the third quarter and 3,000 tonnes in the fourth quarter, he said.

In addition to silicon and silicon alloys, Globe is also seeing increased revenue from other products, including silica fume, a byproduct of the smelting process used in concrete, Bradley said.

Silica fume goes into everything from buildings and refractory products to the cement used to line shale wells, he said.

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