The surge in silver prices has significantly impacted solar panel manufacturers, with the metal’s share of production costs rising from just 3% to a staggering 29%. Amid fierce market competition, these companies are struggling to reverse the ongoing losses that have persisted for over two years. In response to this crisis, panel manufacturers have adopted a dual strategy: increasing product prices while simultaneously accelerating the development of technologies to replace silver with cheaper materials like copper. However, despite these measures, the pressure from rising costs continues to exacerbate industry losses. Since the early 2020s, the solar industry has been grappling with severe overcapacity following a significant expansion of manufacturing facilities.
Recently, the spot price of silver peaked at over $93 per ounce, reaching an all-time high and tripling in price over the past year. Current data indicates that the tiny amount of silver used in solar cells now constitutes 29% of the total component cost, up from 3.4% in 2023 and 14% last year. Analyst Yali Jiang from BNEF remarked, “The skyrocketing commodity prices are creating insurmountable cost pressures for solar manufacturers. This could lead to increased component prices, as manufacturers have little room to absorb additional costs after two years of stagnant market prices.”
According to InfoLink Consulting, leading Chinese manufacturers in the world’s largest market have raised prices to over 0.8 yuan per watt, marking an increase of 1.4% to 3.8% from the previous week to reflect the rise in silver prices. Consequently, the price for a typical 500-watt module has reached approximately 400 yuan ($57). Several major solar companies, including Trina Solar, have warned that they expect to continue reporting net losses through 2025. This guidance suggests that despite self-regulation efforts within the industry and government interventions to curb overcapacity and stop price wars, the downturn remains unresolved.
On Friday, silver was trading around $91 per ounce, poised to mark its ninth consecutive month of gains—the longest streak recorded since 1950. Silver paste, a critical material in solar panels used to create conductive contacts for electricity transmission, has led manufacturers to seek ways to reduce its usage to cut costs. BNEF data indicates that the average silver usage per watt is expected to drop to 8.96 milligrams by 2025, down from 11.2 milligrams in 2024. Efforts to achieve this goal are accelerating.
LONGi Green Energy recently announced that it will soon begin substituting silver with cheaper metals in its solar cells. Engineers have various methods to partially or fully replace silver with copper, but rushing this transition may pose risks. Customers typically demand warranties lasting 20 years or more; increasing the ratio of alternative materials could shorten the lifespan of the cells due to insufficient testing of new materials. “If a module fails after ten years while the warranty is for twenty years, the manufacturer could face significant compensation claims or even bankruptcy,” cautioned Greg Gregson, founder of Silver Bullion Group.
Furthermore, the Shanghai Metal Market reported this week that even limited substitutions, combined with a projected slowdown in global module installations, might lead to a 17% decline in silver usage within the industry this year, based on an estimated annual demand of around 6000 tons by 2025. Data from the Silver Institute shows that last year, the solar industry accounted for approximately 17% of total silver demand, more than double that of a decade ago and comparable to jewelry usage. A significant slowdown in consumption could threaten the long-term upward momentum of silver prices, which has been driven primarily by speculative interest and broader capital flows into commodities.
Nikos Kavalis, Managing Director of Metals Focus, stated, “Given the current silver prices, further substitutions are inevitable. While investment demand remains strong, this will not impact prices in the short term, but it does indicate that future industrial consumption of silver will decrease.”
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