Elkem Launches Review of Silicones Division to Navigate Market Challenges

Elkem

Elkem, a Norwegian ferro-alloy and silicon producer, has initiated a review of its silicones division in response to overcapacities in China and weak consumer markets. The company’s goal is to streamline operations and reallocate capital to its silicon products and carbon solutions divisions. As a fully integrated player in the silicones industry, Elkem handles everything from silicon metal production to downstream silicone specialties. However, the company faces a tough operating environment due to global oversupply, particularly in China.

Elkem's Investment in Expansion and Recovery in 2024

To address these challenges, Elkem has invested heavily in expanding its production capabilities. In 2024, the company allocated 4.4 billion Norwegian kroner ($390 million) to enhance its Chinese and French operations, boosting overall capacity by 140,000 tons per year. The improvements in China were completed in May, while the French project was scheduled for completion by the end of the year. Despite the market difficulties, Elkem’s silicones division reported a significant recovery, with earnings before interest, taxes, depreciation, and amortization (EBITDA) of NKr145 million for the January-September period in 2024. This marked a major improvement from a loss of NKr672 million in 2023, driven by operational efficiencies and the ramp-up of new capacity.

Strategic Review with Expert Advice

To ensure the company’s continued success in this challenging environment, Elkem has appointed Norwegian bank ABG Sundal Collier to assist with the review. While the timeline for the review is not yet clear, the company is scheduled to report its fourth-quarter results on February 12. This review underscores Elkem’s commitment to maintaining competitiveness in the silicones sector and ensuring capital is deployed effectively across its divisions.