Bloomberg:
Demand for solar panels is squeezing silver supply
Changes to solar panel technology are accelerating demand for silver, a phenomenon that is widening a supply deficit for the metal with little additional mine production on the horizon.Silver, in paste form, provides a conductive layer on the front and the back of silicon solar cells. But the industry is now beginning to make more efficient versions of cells that use a lot more of the metal.
Solar is still a fairly small part of overall silver demand, but it is growing. It is forecast to make up 14 per cent of consumption this year, up from about 5 per cent in 2014, according to a report from The Silver Institute, an industry association. Much of the growth is coming from China, which is on track to install more panels this year than the entire total in the US.
Solar is a ‘‘great example of how inelastic demand for silver is’’, said Gregor Gregersen, founder of Singapore-based dealer Silver Bullion. The solar industry has evolved to become much more efficient with using smaller amounts of silver, but that was now changing, he said.At the same time, supply is starting to look tight. It was flat last year, even as demand rose by nearly a fifth, figures from The Silver Institute show. This year, production is forecast to increase by 2 per cent while industrial consumption climbs 4 per cent.
The trouble is that cranking up supply is far from easy, given the rarity of primary mines. About 80 per cent of supply of the metal comes from lead, zinc, copper and gold projects, with silver a by-product.
And in an environment where miners are already reluctant to commit to large new projects, lower margins in silver compared with other metals mean positive price signals aren’t enough to crank up output. Even newly approved projects could be a decade away from production.
The result is a strain on supply so significant that a study from the University of NSW forecasts that the solar sector could exhaust between 85 per cent to 98 per cent of global silver reserves by 2050. The volumes of silver used per cell will increase, and it could take five to 10 years to bring them back to current levels, says Brett Hallam, one of the authors of the paper.
Chinese solar companies, however, are actively exploring using cheaper alternatives such as electroplated copper. Technologies that use cheaper metals are now sufficiently advanced, and will soon be put into mass production once silver prices surge, says Zhong Baoshen, chairman of Longi Green Energy Technology, the world’s biggest panel manufacturer.
Silver is trading at about $US22.70 an ounce. It’s dropped about 5 per cent this year, but is well above where it was before surging in 2020 as the pandemic buoyed demand.
‘‘Substitution will look more interesting when silver is at, say, $US30 an ounce as opposed to $US22 to $US23,’’ said Philip Klapwijk, managing director of Hong Kong consultant Precious Metals Insights.There won’t be a ‘‘doomsday scenario’’ where we run out of silver, but ‘‘the market will restore an equilibrium at a higher price’’, he said.
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Ash here.
Readers of this thread will be aware S32 produces 6% of global Ag supply from long-life Cannington. Hermosa, set to produce from 2027, maybe sooner, is a much bigger resource.
The harder I look, the more certain it seems base metals are a superior bet to the battery metals sector seething with uncompensated risk and where many substitution alternatives can ease demand pressures.
S32 is well run and cheap. CONVICTION BUY
Ash
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