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Heraeus Precious Appraisal

  • Edition 17 - 18 June 2018

China cuts solar cell tariffs; hits silver demand by 10 moz

Chinese photovoltaic (solar panel) installations could drop by a third this year. The Chinese authorities have announced a lower feed-in tariff, removed government subsidies for utility-scale projects and put a cap on the amount of newly installed distributed (small-scale) solar capacity at 10 gigawatts (GW) (compared to 19.4 GW in 2017). This level has almost certainly been reached after 7.68 GW worth of distributed solar capacity was installed in Q1’18, according to the Chinese National Energy Administration (NEA). 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.

In 2017 around 9% of silver demand, 94.1 moz, was used globally to make photovoltaics, according to The Silver Institute’s World Silver Survey 2018. Silver is used in solar panels to form the electrical connections on the cells. China is the largest manufacturer and user of solar cells with more than 53 GW of new photovoltaic capacity installed in 2017 (source: NEA), representing over 50% of global installations.

It was anticipated that Chinese solar installations would be lower than last year, owing to reduced feed-in tariffs for both distributed and utility-scale projects from the start of 2018, but that global installations would rise modestly. However, with the new rules cutting installations in China, and disruption to installations in the US caused by the 30% import tariff imposed by Donald Trump in January, global solar installations are likely to decline in 2018.

If global solar installations drop by 10 GW this implies a reduction of a little under 10 moz in industrial silver demand, equivalent to around 1% of total global silver demand. With a decline in industrial demand now likely, the silver price could lack support in the second half of 2018.

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Precious Metals Update Archive 2017

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