A drop in Chinese photovoltaic solar panel installations this year could result in a decline in silver demand of about 10 million oz, German precious metals refiner Heraeus said Monday. "If global solar installations drop by 10 GW, this implies a reduction of a little under 10 million oz in industrial silver demand, equivalent to around 1% of total global silver demand," Heraeus said in a report.
"With a decline in industrial demand now likely, the silver price could lack support in the second half of 2018," it added.
Heraeus analysts noted that Chinese authorities recently announced lower feed-in tariffs, removed subsidies for utility-scale projects and put a cap on newly installed small-scale solar capacity at 10 GW, compared with 19.4 GW last year.
That capacity level has almost certainly been reached following the installation of 7.68 GW of distributed solar capacity in the first quarter, Heraeus said, referring to a statement from the Chinese National Energy Administration in late April.
"This combination of measures means that there could be a sharp slowdown in photovoltaic installations in China in the second half of the year, negatively impacting silver demand," Heraeus said.
China is the largest manufacturer and end-user of photovoltaic solar cells, with more than 53 GW of new capacity installed in 2017. According to the Washington-based Silver Institute, solar cell production accounted for about 9% of total silver demand, or 94.1 million oz, in 2017.
Solar installations were expected to decline in China this year due to reduced feed-in tariffs for distribution and utility-scale projects, but rise modestly in the rest of the world.
"However, with the new rules cutting installations in China, and disruption to installations in the US caused by the 30% import tariff imposed by [President] Donald Trump in January, global solar installations are likely to decline in 2018," the Heraeus analysts said.
