Elkem improves silicones earnings position in first quarter

Oslo – Elkem ASA has reported a significant improvement in first quarter earnings (EBITDA) within its silicones division, which is currently under strategic review.

Earnings for the three months to end of March reached NOK201 million (€17 million), up from a loss of NOK103 million in the same period last year, Elkem announced 30 April.

The improvement was primarily linked to “improved cost positions” and lower cost of materials, despite turnaround shutdowns at facilities in China and France.

Segment sales for the quarter rose 16% year-on-year to NOK3.8 billion, driven by higher volumes which were partially offset by lower selling prices.

Sales volumes were up 34% year-on-year due mainly to higher demand in Asia-Pacific, said Elkem.

Elkem initiated a strategic review of its silicones division with the target to streamline the company in January.

In its first quarter report, the Norwegian supplier said the division has now been reclassified as “discontinuing operations and assets held for sale.”

The strategic review, it noted, is progressing with a target to conclude before year-end.

Commenting on the market environment, Elkem said demand recovery in China was weaker than expected, particularly in sectors such as construction, textiles, and chemicals

According to Elkem, several upstream siloxane plants reduced production in the first quarter due to maintenance activities.

As a result, DMC prices in China increased to RMB 14,600/tonne in the first quarter.

Elked added that DMC prices had declined by more than 15% in early second quarter, due mainly to ongoing trade tensions.

In the US and the EU, silicones markets were impacted by “seasonal factors and weak commodity demand,” Elkem added.

Elaborating on market conditions, CEO Helge Aasen said uncertainty had been ramping up due to geopolitical turmoil and trade tensions.

However, he said, Elkem’s geographically diversified production sites could offer strategic opportunities to mitigate the negative effects from trade measures.

“Both the EU and the US are net importers of Elkem's products, including silicon, ferrosilicon, foundry alloys, and silicones,” Aasen said.

As a result, the “direct effect” of tariffs introduced on either side of the Atlantic could be modest on Elkem.

However, cautioned Aasen, the “indirect effects in the form of reduced overall market demand could be more substantial.”