Silver: Solar demand headwinds emerge – Commerzbank

Commerzbank’s Carsten Fritsch notes that the Silver price has surged over 10% this week to USD 63.9 per troy ounce, its highest level since late June, pulling the gold/silver ratio back below 70. However, he highlights that solar-sector demand is set to decline for a second year, with Silver’s share in solar modules and total demand expected to fall despite still-elevated prices.

Solar sector drag on silver demand

"Prices for silver, platinum and palladium also rose sharply in the wake of gold. Since the start of the week, the silver price has risen by more than 10% to USD 63.9 per troy ounce, its highest level since late June. As a result, the gold/silver ratio has fallen below 70 again."

"The tailwind for the silver price from the solar industry could be slowing down. BNEF estimates that 19% less silver will be used in the production of solar modules this year than last year."

"This would mark the second consecutive decline. The solar industry’s share of total silver demand is therefore expected to fall to 14%, down from 18% last year. BNEF’s assessment largely aligns with that of the Silver Institute in April, which also anticipates a significant decline in demand from the photovoltaic sector this year."

"BNEF attributes this to a reduction in the use of silver in silicon solar cells, which is expected to fall by a further 17% this year. This was likely triggered by the sharp rise in prices, which reached a record high of USD 120 per troy ounce at the end of January."

"The silver price has since fallen by roughly half, but is still around 65% higher than a year ago. According to BNEF, silver currently accounts for more than 17% of the production costs of a solar module, making it the largest component of material costs."