Overproduction of solar panels and stagnant demand have led to a significant reduction in silver prices: this market imbalance has relevant implications not only for the photovoltaic sector, but also for the jewelry and investment industries
The price ofsilver is dropping dramatically, surprising analysts and investors. But what’s really going on behind the scenes of this sudden drop? There are a few factors that are transforming the market for one of the world’s most precious metals. If you think silver is just a safe haven, get ready to reconsider your perspective.
Recently, the excess production of solar panels led to a situation of overproduction. This surplus has led to a reduction in the costs of the solar panels themselves, directly influencing the market for silver, an essential component for the manufacture of these devices. Falling solar panel prices, combined with overproduction, has led to a decline in demand for silver in the photovoltaic sector.
The impact on the global silver market
In addition to overproduction in the solar sector, global demand for silver has shown no signs of recovery. The silver market has seen a combination of negative factors, including stagnant demand and oversupply. This imbalance further pushed silver prices lower. Silver inventories are rising, further contributing to lower prices on the international market.
A significant aspect of the increase in demand for silver is due to massive production of solar panels in China. This production boom, supported by government subsidies, has pushed demand for silver to record levels over the past 12 years. While Chinese manufacturing has contributed to lower solar panel prices, it has also caused higher prices for the silver needed to make them.
China has invested hugely in solar panel manufacturing, playing a dominant role in the global supply chain. Currently, the Land of the Dragon holds more than 80% of the world’s production capacity for polysilicon, ingots, wafers, solar cells and modules. This level of concentration represents a significant vulnerability for global supply chains, as a large portion of production is concentrated in a few Chinese provinces, such as Xinjiang and Jiangsu. These areas benefit from favorable government tariffs and are heavily dependent on coal for energy production, further contributing to the environmental impact of solar generation.
The reduction in silver prices has significant repercussions on various sectors, not just the photovoltaic sector. The jewelry industry and the precious metals investment industry are also affected by this situation. Analysts predict that if the situation of overproduction and stagnant demand persists, silver prices could continue to fall, with knock-on effects on the global economy.
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Source: The Silver Institute
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