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MINOR METALS-Supply crunch pushes silicon to 18-month high

BENGALURU, Aug 2 (Reuters) - Prices of silicon metal have risen to their highest in over a year because of a supply crunch created by production cuts by leading producers China and Russia.

Silicon metal prices <SIL-LON> have risen to 1,960 euros a tonne, an 18-month high and a rise of about 38 percent from a low of 1,425 euros a tonne in mid-September last year.

Major silicon producers in China and Russia have cutback their output due to higher costs for electricity and coal, traders said. Silicon is produced through a reaction of silica with carbon materials like coke, coal and wood chips in an electric arc furnace.

"Producers in one of the main silicon manufacturing provinces of Yunnan (China) are reportedly facing rising costs of hydropower, coal and pet-coke," analysts at Jefferies said in a note.

Hydropower is a major source of electricity in China.

"Usually producers restart capacity into the summer rainy season as hydropower costs decline, however, this has not been the case in several regions with elevated costs persisting," Jefferies said.

Most silicon is used in alloys, including aluminium-silicon and ferro-silicon, which are important ingredients in the manufacture of engine blocks, cylinder heads and machine tools. It is also used to make semiconductors for electronics.

The Chinese government has cracked down on illegal and polluting plants which has also mean tighter supplies of the metal, traders said.

Higher silicon prices have led some end users like aluminium alloy makers in China to postpone their purchases, they said.

China produced 4,600 tonnes or about 64 percent of the world's silicon and Russia contributed 747 tonnes or 10 percent last year, according to data from the United States Geological Survey. (Reporting by Eileen Soreng in Bengaluru; Editing by Pratima Desai and Jane Merriman)