China’s overproduction of solar panels drives silver demand to 12-year high

The global demand for silver jumped in recent years, driven by increased of solar panel production. China produces more solar panels than the rest of the world. This surge led to a significant rise in silver prices, which have increased 35% this year, reaching a 12-year high.

According to the Silver Institute, a nonprofit that tracks trends in the industry, the world’s need for silver is set to exceed supply for the fourth consecutive year. In 2023, silver demand for industrial applications, particularly in the green energy sector, rose by 11% to an all-time high of 654.4 million ounces.

As of now, silver costs $32 per ounce, a substantial increase from around $20 per ounce four years ago, when demand was considerably lower. The average solar panel requires a little over half an ounce of silver. While this cost increase might seem negligible at first glance, the implications for large-scale solar projects are significant.

For example, a one-megawatt solar farm that powers between 400-900 homes can require as many as 2,000 panels. Therefore, a project that would have spent approximately $24,000 on silver in 2020 now costs nearly $38,500 in the current market.

The boom in silver prices has been partly attributed to China’s overproduction of solar panels. Western nations accused Beijing of utilizing unfair trade practices to achieve this.

Chinese solar panel producers benefit from government subsidies that keep their prices low. Despite China’s production exceeding worldwide demand, the price of panels produced by other nations continues to rise because of increased global demand for silver driven by Chinese production. At the same time, China-based companies can maintain lower prices thanks to the subsidies from the Chinese Communist Party.

This dynamic led some companies to explore alternative methods to build solar panels that use less silver. While no other material matches silver’s conductivity and reflective properties, copper emerged as a potential alternative that could help reduce production costs and potentially increase efficiency.