Photo: Bloomberg LP
The metal extracted from the second most abundant element on Earth, it is becoming increasingly scarce, threatening the production of everything from car parts to chips, putting a new rod in the wheels of the world economy.
Silicon shortages caused by shrinking production in China, pushed prices up 300% in less than two months. This is another of many obstacles – from slow supply chains to power shortages, which create a dangerous combination of factors for both companies and consumers, writes Bloomberg.
The problems with silicon also emphasize how the global energy crisis is affecting economies in different ways. The contraction of production in China is just one of the results of efforts to reduce electricity consumption.
Silicon, which is 28% by weight of the earth’s crust, is one of the most versatile building blocks known to man. It is used in everything from computer chips and concrete to glass and car parts. It can also be purified to the superconducting material used to convert sunlight into electricity from solar panels. It is also the raw material for the production of silicone – a water and heat resistant material used for everything from medical implants to deodorants and various types of seals.
But for car manufacturers and chemical concerns the consequences of shortages are particularly worrying.
“If there is a limited supply of silicon, you have a problem,” said Keith Wildey, head of the aluminum alloy’s Romco Metals trading unit. “There is still some supply, but it is traded at an equilibrium price at which the quantity of goods and services sought by buyers is equal to the quantity of goods and services produced by sellers. . ), which is obviously very high “, he added.
Summer peak
Silicon is produced by heating ordinary sand and coke in furnaces. For most of this century, the price ranged between 8,000 and 17,000 yuan ($ 1,200 and $ 2,600) per tonne. But then producers in Yunnan Province were ordered to reduce production by 90% below August levels from September to December due to electricity shortages. Since then, prices have skyrocketed to 67.3 thousand yuan.
Yunnan is the second largest producer in China and accounts for more than 20% of production. In third place is Sichuan, where there are also restrictions, with 13%. The largest producer is Xinjiang Province, where there are no major electricity problems so far.
Along with higher oil prices, as well as metals such as aluminum and copper, silicon shortages further exacerbates supply chain problems affecting producers and carriers to retailers. They have a choice: either to tighten their belts and take the brunt of margins, or to pass the problem on to consumers.
In any case, the double effect on inflation and growth increases concerns about stagflation in worldwide
Damage to the solar industry
Silicon shortages are already causing difficulties for the solar industry, which converts silicon into purified polysilicon, a key component of photovoltaic panels.
The cost of polysilicon for solar demand rose 13% to $ 32.62 per kilogram on Wednesday, its highest level since June 2020, with growing demand leading processing plants to peak capacity.
“This is another excuse for polysilicon manufacturers to increase prices and the price environment for solar modules is very turbulent at the moment,” commented Jenny Chase of BloombergNEF.
The effect on solar prices panels, however, is more limited. Polysilicon manufacturers are enjoying high margins this year, which puts them in a position to absorb price increases better than other industries, according to a report by BloombergNEF.
Prolonged shortage
Silicon also plays a key role in the production of aluminum alloys as a softening agent. It makes metals less brittle when modeled in different shapes.
“We’ve been through this before,” said Buddy Stample, CEO of Constellium Rolled Products and chairman. aboard the American Aluminum Association, at a conference in Washington. “Fortunately, the focus is on supply chain problems, which can return in a satisfactory period of time to keep things moving,” he said.
Prices are expects to remain elevated around its current levels until next summer, until production increases in the second half of the year, said Yang Xiaoting, a senior analyst at the China Metal Exchange. Demand is growing from sectors such as solar and electronic equipment.
“Even if there were no restrictions on energy consumption, there would be a shortage of industrial silicon,” she said.
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