silicio.jpgChina plans to build the largest silicon plant in the world and Spain's Ferroatlántica, a leading silicon producer, claims it is front runner to win the deal.

The chairman of Ferroatlántica, Juan Miguel Villar Mir, was among a group of Spanish businesspeople invited to Chengdu last week to talk up the potential for improved traded relations between the two countries — see this EngagingChina story.

Villar went beyond the usual well-intentioned promises that characterise such events by unveiling a mammoth $300m project to build the world's largest silicon metal production plant in Sichuan province. When fully operational, it will be capable of producing 100,000 tons of silicon a year.

He stopped short of saying Ferroatlántica had definitely won the contract to build the facility. But in told El Pais in this article (Spanish) that three projects are being considered, two are exclusive to Ferroatlántica while the third involves a JV in which the Spanish company would have 60%. A final decision is expected in September and the company hopes to start building in mid-2008.

The excellent quality of the quartz in Sichuan province attracted Ferroatlántica to this western part of China and the company has identified three mines that could supply the raw material from which silicon metal is smelted. Production of silicon metal is extremely power intensive and so Ferroatlántica also plans to build a 200MW hydroelectric power station.

Ferroatlántica is one of the leading producers of silicon and owns 13 factories including the world's current largest, which is in South Africa.

World production of silicon is around 5m tons a year but most silicon metal is used to make aluminium alloys or for chemical applications.

Only a small part is used to make silicon wafers — the raw material of the semiconductor industry — and demand for this purest form of silicon has soared recently due to the demands of the photovoltaic industry, in which China also has big ambitions — see this EngagingChina story.

Western China has largely been neglected by foreign investors, which is presumably why the Spanish businesses were invited to Chengdu, the capital of Sichuan province. While the region has an abundance of natural resources including quartz, most of its inhabitants are desperately poor and infrastructure lacking. So, it will be interesting to see if this initiative by Ferroatlántica can put China's Wild West on the map for other foreign investors. More on the “Go West” campaign in this Financial Times story.

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