Vienna (Platts)--14Nov2008

The reduction or removal of the antidumping duty for silicon from China
into the European Union will not solve price or supply issues and in many ways
the market is in the hands of the Chinese government and taxes, BIT Fondel's
senior trader Jack Green said Thursday.

Speaking at Metal Bulletin's 16th International Recycled Aluminium
Conference in Vienna, Green said he could say with certainty that silicon
metal would continue to see high prices and volatility.

Green said if it was assumed that the antidumping duty on imports of
silicon from China into the EU was removed by June 2010, the result would be
an increase in export taxes. "If the tax was high Chinese production would be
diverted to the local market which would exacerbate the European shortage," he
said, adding that if it was low, then there would be closures in Europe and
Brazil -- with the likely outcome of higher European prices and more
volatility.

Green noted that in 1980 there were at least 20 countries where there
were active silicon metal production units. "Today there are 11 countries
where we are sure silicon metal is being produced. I have included Bosnia and
the Philippines where there exist small intermittent producers," he said,
adding that in the Western World some 850,000 mt was produced in 2005 with an
additional approximate 60,000 mt in Russia and Ukraine and 600,000 mt in
China.

"Of the 1.5 million mt silicon metal that will be produced this year
almost all of the 1 million mt from Western producers and Russia will be
marketed through controlled channels. As a contrast 500,000 mt exported from
China is available for purchase by traders -- Chinese and Western -- for
markets everywhere in the world," he said.

He noted, however, that because of trade restrictions in the EU and USA
only a small tonnage of Chinese-origin silicon was exported to these regions
for general consumption. He questioned whether the sale of silicon metal
around the world was rigidly controlled.

Green said the profile of end-use applications for silicon metal had
changed immeasurably in 20 years. "In 1985 the aluminium sector was the
significant industrial end-use market sector But the almost 7% annual growth
over these last 20 in the chemical industry compared to less than half of that
in the aluminium industry has meant that today the two sectors are almost
equally important in volume terms," Green said, adding, however, that some of
these figures masked the real impact.

"Today the Far East and Eastern Europe are fast supplanting the mature
economies -- the Western World of 20 years ago -- as the industrial workshop
of the globe. It is in the Far East that we have seen the real growth in
silicon metal consumption -- over the last five years in secondary aluminium
and now with recent developments in Thailand and China in the chemical
sector," he said.

Green noted that silicon metal was considered at one time as a US
dollar-denominated commodity. "In Europe the euro has taken over this role,
but crucially the US dollar is still the currency applicable to the Chinese
and Russian producers and exporters," he said, adding that the relationship of
the dollar to the major European currencies, originally the deutschemark and
now the euro, had made a major contribution to the competitiveness of
different production units in the world at different times. "However, the low
production cost in China and Russia has always been a threat to US- and
European-based producers whatever the exchange rate," he said.

Green said that in the aluminium sector there had been a steady decrease
in the number of consumers in Western Europe, Japan and the US. "The
consolidation and merging of the primary aluminium industry has had an effect
but the number of closures of secondary plants in recent years in traditional
markets has led to the migration of the secondary aluminium industry to the
Far East, the 10 new member states of the EU and to neighboring countries such
as Romania. Likewise in North America you have seen a migration of the
industry from USA to Mexico," he said.

Green said that if it was remembered that the largest single end-use
application for secondary aluminium ingot is the automobile then the trend of
recent years would almost certainly continue. "We will experience a
significant increase in the consumption of silicon metal in the aluminium
sector in the Far East and a corresponding reduction in Western Europe, Japan
and USA as the world's production of automobiles moves away from those
high-cost countries," he said.
--Michelle de Klerk, michelle_deklerk@platts.com