A mixed ESG bag

Volf
ELKEM 21.11.2019 kl 09:13 797

Sakset fra DNB

ELKEM
A mixed ESG bag
In this report we examine Elkem’s ESG profile. We
conclude the impact on its business model is mixed with
positives from higher demand from EVs and battery
grade graphite, and as its Silicones products could
avoid over 14mmt of emissions p.a. The main negative
is that its value chain from quartz to silicones has a
large environmental footprint including coal, D4, and D5,
and consumer perception towards silicones appears
mixed. We reiterate our BUY and NOK30 target price.
Silicones – a net benefit to the environment. Elkem uses large quantities of
hazardous substances, generates hazardous waste, and emits water and air
pollutants in its production, mostly in silicones. Elkem also has coal-based production
in China. Somewhat surprisingly, the net effect of silicone products is beneficial for the
environment. Case studies have shown that 1kg of silicones abates c48kg of CO2e as
it replaces less-efficient products. For Elkem this could mean its silicones abate
>14mmt p.a. versus the 2.54m tonnes it emitted in 2018.
Elkem Norway – c75% lower emissions than China. To produce 1kg of silicon and
ferro silicon, 11–13 KWh of energy is required. Hydro-based production (in Norway)
emits c75% less compared to its coal-based Chinese peers. The production still emits
3kg of CO2 per kg produced as coal (low-ash metallurgical coal and charcoal), or
other sources of carbon (woodchips) are needed for the carbothermal reduction of
quartz. We do, however, consider the possibility for ‘carbon tiering’ as limited because
FeSi and Si represent a small share of the end products.
EVs contain 4x more silicon than conventional cars. Short-term Elkem could
benefit from the growth in electric vehicle (EV) production. An EV contains c4x more
silicone than a conventional car and we also note that Elkem is already a key supplier
to Tesla. Elkem is also venturing into battery grade graphite and is building a pilot
plant in Norway. We conclude that ESG trends could have a positive impact on
demand for Elkem’s products but that there are also some negatives from the
production process. We reiterate our BUY and NOK30 target price
Redigert 21.01.2021 kl 06:37 Du må logge inn for å svare