Elkem and the Silicon Cycle — Aluminium, PMI and the +211% Signal

Elkem (ticker: ELK) is one of the world's largest producers of silicon, silicones and carbon materials. Listed on Oslo Børs since March 2018, it is the most directly cycle-sensitive materials company on the exchange — with earnings that can swing 500% from trough to peak inside a single cycle.

Understanding Elkem means understanding three overlapping cycles: aluminium prices, global manufacturing PMI, and European energy costs.

Silicon, silicones and why China controls the price

Elkem's silicon metal is a raw material for aluminium alloys, solar panels and electronics. Prices are set at the LME and heavily influenced by Chinese production — China accounts for roughly 70% of global silicon output. When Chinese industrial activity slows and electricity becomes expensive, Chinese smelters cut production. Prices stabilise and recover. When they restart at scale, prices crash again.

This makes Elkem highly correlated with LME aluminium — both are energy-intensive metals whose prices move in sync with global industrial cycles.

The 2020–2022 cycle: +211% in 24 months

When COVID hit in March 2020, aluminium collapsed toward $1,450/t — below Signycle's buy threshold of $1,700/t. Elkem's stock fell to approximately NOK 9–10. Industrial demand had evaporated overnight, energy prices were low, and markets priced in a prolonged downturn.

The recovery was faster than anyone expected. Global stimulus, a V-shaped industrial rebound, and energy cost spikes in Europe and China (which forced smelter curtailments) all conspired to push aluminium above $3,000/t by early 2022. Elkem's stock peaked near NOK 45.

The energy cost factor — Elkem's unique risk

Smelting silicon is extraordinarily energy-intensive. Elkem's Norwegian and French operations use long-term power contracts that historically insulated them from spot energy prices. But the 2021–2022 European energy crisis exposed the limits of this protection: rising gas prices (TTF) compressed margins even as metal prices rose.

This is an important nuance — Elkem benefits from high silicon prices but is simultaneously hurt by high energy prices. The ideal environment is high metal prices combined with low or stable European power costs. Signycle tracks both LME aluminium and TTF gas as inputs.

PMI as the confirmation indicator

Global manufacturing PMI below 49 indicates industrial contraction — which typically precedes an aluminium price trough by 3–6 months. The two-indicator combination (aluminium price + PMI) has historically produced the cleanest Elkem entry points: buy when both are in their buy zones, hold until either reaches its sell threshold.

Current signal — March 2026

LME aluminium at ~$2,600/t is in the neutral zone. PMI has softened globally but has not broken below 49. No active signal. A further weakening in Chinese industrial activity, or a renewed European energy shock, could push both indicators toward buy territory. Monitor monthly.