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GRAPHIC-Solar industry demand raises temperature in silicon market

·2 min read

* Silicon market deficit at 92,000 tonnes this year - WoodMac

* Market has grown 20% since 2015

By Pratima Desai

LONDON, Sept 21 (Reuters) - An unexpected surge in demand for silicon, mainly from the solar energy industries in China, Europe and the United States, has lead to large deficits and fuelled a price rally which shows no signs of abating.

Silicon prices have climbed to round $4,000 a tonne in all three locations, the highest on record, from levels below $2,000 a tonne at the start of the fourth quarter last year.

Silicon is made from silica or sand, abundant on the earth's crust. But processing capacity for greenfield developments can take two to three years once permits and financing are in place.

And restarting idled capacity could take three to six months, likely longer if a plant has been closed for a long time, according to CRU analyst Jorn de Linde

"Silicon prices have been soaring as recent output curbs in China have made supply even tighter on the back of a first half deficit this year of more than 100,000 tonnes," de Linde said.

"I was expecting double digit quarter-on-quarter demand growth in the fourth quarter last year, it turned out to be more than 20%. The supply side wasn't prepared and consumer stocks are low."

Globally, the silicon metal market is estimated at roughly three million tonnes against around 2.5 million tonnes in 2015.

Wood Mackenzie expects a deficit of 92,000 tonnes this year compared with a shortfall of 41,000 tonnes last year. It expects solar energy to account for 19% or 658,000 tonnes of total demand this year compared with 598,000 tonnes in 2020.

Silicon is also used to make aluminium alloys for the auto industry, silicones for many products including sealants, adhesives and lubricants and semiconductors.

One new source of silicon demand could be the lithium-ion rechargeable batteries used for electric vehicles, where the industry is experimenting with replacing the graphite in the anode with silicon, only partially at this stage.

Less silicon is needed by volume, which frees up space for the nickel, cobalt and managanese cathode to improve the energy density of the battery and range of electric vehicles.

However, Wood Mackenzie's Kevin Fowkes says: "Silicon is not going to replace graphite to any significant extent within the 10-year time scale we look at."

(Reporting by Pratima Desai; editing by David Evans)