A record year with extraordinarily strong markets

The economic downturn in 2020 was followed by an extraordinary market momentum in 2021, enabling Elkem to deliver record-high revenues and results. Several global trends will drive demand for Elkem’s products and hence increase our contributions to a sustainable future

Elkem benefitted from strong markets in 2021. However, our record results were also very much based on strong cost and market positions systematically built-up over time through continuous improvement and deliberate strategic choices. We have secured predictable access to low-cost sustainable input factors despite supply chain challenges, and our operations have been able to maintain high regularity and quality. We remain well positioned for growth with the green shift, digitalisation and a rising global middle class.

The coronavirus pandemic (Covid-19) also continued throughout 2021. As a global company, Elkem has been exposed to the spread of the disease and to evolving government restrictions in all countries where we do business. Our primary focus has remained on health and safety, in line with Elkem’s zero-harm philosophy. In 2021, Elkem registered 342 confirmed cases among our more than 7,000 employees. Some of our colleagues have experienced serious symptoms, but we are pleased that all have recovered and are doing well.

In October, I was asked by the board to return as permanent CEO of Elkem. I feel both honoured and privileged to be given the opportunity to work with a diverse and very capable team to deliver value for our customers and other stakeholders globally. I am excited and energised by the task, as we continue to develop Elkem’s global team.

Delivering today – positioning for tomorrow

Systematic continuous improvement over time by a dedicated organisation, combined with an integrated business model and attractive market positions were key enablers to deliver record-high financial performance in 2021. I am impressed by the team in Elkem and their ability to maintain focus on delivering to our customers and drive strong performance, while also positioning for the future in line with our long-term strategy.

Global trends to drive growth in demand

Elkem used 2021 to lay a solid foundation for profitable growth and increased market share in the years to come. We believe that long[1]term global challenges and megatrends like sustainability, energy demand, urbanisation, increased standard of living, population growth, and digitalisation will drive growth in demand for advanced materials, including silicones, silicon- and carbon solutions. We are well-positioned to benefit and to be part of the solution to combat climate change.

Operational excellence and increased specialisation

Elkem has a vision to provide advanced material solutions shaping the future. Our corporate strategy is to grow and strengthen our competitive positions through continuously improving and developing new products and removing “waste” in the entire value chain.

Operational excellence and continued productivity improvement remain important keys to profitable growth. Even before the impact of Covid-19, we launched a new productivity improvement programme to enhance the company's cost position and streamline the organisation. As announced in 2019, we had identified a potential of more than NOK 350 million in annual improvements. At the end of 2021, the programme has realised several value chain improvements reducing run-rate cost level by NOK 395 million.

Our efforts to increase specialisation reached a milestone in 2021 with more than one million electrical vehicles (EVs) featuring our proven battery thermal management solutions. The global demand for EVs is growing fast, and some analysts now expect EVs to account for around a third of new car sales by 2030. China is the world’s largest single EV market, offering interesting opportunities to realise Elkem’s specialisation strategy.

Strengthening all our business divisions

The strategy of growing and strengthening our competitive position is further amplified in all our business divisions.

Our Silicones division made important steps in 2021 to increase profitable growth and grow market shares along with improving profitability through systematic improvement work and specialisation. Our new manufacturing facility in France will produce high-quality organo-functional silicones, and we also plan to upgrade and debottleneck our silicone upstream plant in Roussillon, France. Construction of a new production workshop for silicone fluids at the Xinghuo plant in China started in 2021 and we approved a NOK 3.8 billion expansion of this plant – representing a step-change for Elkem as a leading supplier in the world’s fastest-growing silicones market.

The Silicon Products division has solid market positions globally and was able to capitalise on the strong market momentum in 2021 while running at high capacity. We intend to continue focusing on improved profitability through systematic improvement work, while selectively pursuing growth, just like we did in 2021 when we entered agreements to study carbon capture opportunities at our Norwegian smelters, when we decided to invest in new infrastructure to increase productivity and reduce emissions at Elkem Rana, and when we opened our new energy recovery plant in November and positioned Elkem Salten as one of the world’s most energy-effective silicon plants.

Our Carbon Solutions division remains a strong and highly profitable market leader in its segments. Market conditions in 2021 were good and we maintained strong profitability. Focus on operational excellence and selective growth will be key measures to maintain our strong position in the future.

Strategic initiatives

Our ability to meet future ambitions is supported by three corporate initiatives in the fields of digital transformation, ESG, and people. 

First, we believe that digital technologies can be disruptive, and we aim to take a leading position in our industry. Our Digital Office was established in 2020 to drive a digital transformation across the company, We have trained managers and leaders on managing digital transformation, use-case team members on the methods of delivering valuable solutions using agile and digital and analytics, and upcoming agile coaches on coaching teams in doing twice the work in half the time. We are currently working on a number of specific use-cases, ranging from remote assistance to value chain optimisation and digital pricing.

Second, Elkem aims to contribute to shaping a sustainable future, and key stakeholders put increasing demands on ESG strategies and performance. An important step was made in October when we announced a new climate roadmap detailing how the company plans to reduce emissions in line with the Paris agreement of limiting global warming to well below two degrees. Another new milestone was reached in December when we launched our first TCFD report on climate risks and opportunities. I am proud to state that we have received an A- rating from CDP in 2021, ranking among the world’s leading companies on climate transparency and action.

Third, organisational design and development of our people are fundamental in delivering on the business strategy. It is also key in developing a culture to leverage critical competencies, diversity, core values, and behaviour. Our current focus is on identifying future competence and capacity needs and continuing to develop corresponding gap[1]closing strategies.

Green technologies and partnerships

Elkem is actively using its competence to develop new sustainable business areas. The ongoing projects demonstrate our capability to drive the development of new green technologies.

Battery Materials is a unique growth opportunity based on graphite and silicon. In April, Elkem successfully commissioned the industrial pilot for battery materials in Kristiansand, Norway, starting industrial-scale pilot production and product verification with future customers. In May, we established Vianode as a new company and brand dedicated to strategic growth opportunities in advanced battery materials. An investment decision for a large-scale battery materials plant is being evaluated.

Biocarbon replacing fossil carbon is the main contributor to fossil CO₂ reductions towards 2030. We are starting a pilot facility in Canada in February in 2022 to test a new technology to produce bicarbon pellets from wood waste materials. Elkem currently uses more than 20 percent biocarbon in our production and in October, we announced a new goal of 50 percent biocarbon by 2030.

Energy recovery represents circular solutions for lower emissions and higher efficiency. With the opening of the new energy recovery plant at Salten in the northern part of Norway in November, Elkem’s total energy recovery capacity is now approximately 900 GWh per year, representing about 15% of our total energy consumption globally.

I would like to thank all Elkem colleagues and stakeholders for their remarkable efforts and support throughout a record year. We have delivered strong results while also positioning for the future. And we have all the ingredients in place to make 2022 another successful year for Elkem while remaining mindful of a very dynamic and unpredictable external environment.

This mindset goes hand in hand with Elkem’s mission: To contribute to a sustainable future by providing advanced silicon, silicones, and carbon solutions, adding value to our stakeholders. Let’s do it!

Helge Aasen

CEO, Elkem ASA