INTERVIEW: Solar cells anchor growing industrial silver demand, while EVs offer opportunity: analyst

The photovoltaic (PV) cell market for solar energy panels continued to anchor a 9% year-over-year increase in global silver demand for industrial applications in 2021, and electric vehicles present an opportunity for further gains over the coming years, according to Metals Focus Managing Director Philip Newman.

New global solar capacity installations totaled about 158 GW in 2021, up from about 130 GW of new capacity in 2020, but the PV sector has represented an area of steady silver demand growth over a longer time frame, Newman said in an interview with S&P Global Commodity Insights.

"To rewind back to early 2021 and pre-COP26 [UN Climate Change Conference in 2021], there was already a lot of focus on green technology, and investors were thinking about silver, but PV is a pretty mature technology," he said. "The 114 million oz of estimated PV silver demand last year compares to around 100 million oz back in 2017, so [this demand] hasn't suddenly emerged."

In a silver industry annual report prepared for the Silver Institute and released April 20, Metals Focus said PV cells "still reign supreme" for silver demand among renewable energy applications.

"The broad consensus for a need to move towards carbon neutrality for sustainable development has led to the PV market continuing to expand and to spread geographically; there were 20 countries that achieved 1 GW last year," the report said, adding that the record PV installations last year helped silver offtake in the segment to reach nearly 11% of total silver demand.

Even if solar panel installations don't ultimately meet aggressive forecasts and expectations, the industry will continue to be a staple for silver demand, Newman added.

Automotive sector

Newman said silver demand in the automotive sector was also expected to grow in the coming years amid the ongoing electrification of vehicles. However, EVs could have had a larger impact on silver demand in 2021 if the global semiconductor shortage and other logistical issues had not hindered automakers.

"The automotive market is an exciting area, and that's probably the one that's been held back the most because of the chip shortage, but silver is the one precious metal that really benefits moving from internal combustion cars to hybrid and fully electric cars," Newman said.

Newman said more silver will also be needed in the infrastructure that supports EVs, such as charging stations.

Global industrial demand for silver in 2021 reached a record 508.2 million oz as demand rose across all key end markets, according to the Metals Focus report.

Potential recession unlikely to hurt demand

Newman said industrial silver demand is unlikely to face long-term impacts from a potential recession.

"When you have a recession, sometimes the first thing the government will do is to cut back on expenditures to where you can see some of these things reduced or the investment in new capacity reduced," Newman said, referencing spending for solar energy infrastructure and other projects.

However, Newman described these types of policies as a short-term development and a "pause" to growing silver demand rather than a "deviation from a long-term strategy."

Thrifting could pose risk at higher prices

Silver thrifting in industrial applications is unlikely to significantly hurt demand for the metal at its current price range, but thrifting has occurred in the PV market and could pose a larger risk if prices rise.

"It may only be a few percentage points every year, but it does add up," Newman said, adding that the PV industry has previously tried to lower silver content in cells when silver prices rose.

"Even when prices around 2016-2018 were depressed, we still saw that thrifting continue because the industry was worried about what happens if prices rise again," he said. "What we're seeing now is that thrifting continues and, therefore, if you do see a 20% rise in cell capacity, that doesn't equate to a 20% rise in silver demand."

Otherwise, most other industries are "quite comfortable to continue using silver" at current prices, Newman added.

Silver prices averaged $25.14/oz in 2021, up from $20.55/oz in 2020, according to the Metals Focus report. This is the highest level since 2012, but below the record $35.12/oz average in 2011.

In the automotive industry particularly, Newman said silver holds a "sweet spot" where it sees less pressure from thrifting because its price "is low enough that it doesn't have an impact so much" on the total cost of a car.