Soaring silver prices are exacerbating the plight of solar panel manufacturers—companies already struggling fiercely in a brutal market to reverse losses that have been widening for over two years. To counter the impact, panel makers have initiated a dual strategy: raising product prices while simultaneously accelerating technological plans to replace silver with cheaper materials like copper. However, despite these efforts, industry losses continue to mount, as the sector remains deeply mired in severe overcapacity following a frenzied factory-building spree in the early 2020s. This week, spot silver prices surged to over $93 per ounce, setting a new record high and having more than tripled over the past year. Data indicates that the trace amounts of silver used in cells now constitute 29% of a module's total cost, a stark increase from just 3.4% in 2023 and 14% last year. BNEF analyst Yali Jiang stated, "Surging commodity prices are imposing irresistible cost pressures on solar manufacturers. This could drive up module prices, as manufacturers have almost no room to absorb additional costs after two years of depressed market prices." InfoLink Consulting reported that in the world's largest market, Chinese module manufacturers raised prices this week to above 0.8 yuan per watt, an increase of 1.4%–3.8% from last week, to reflect the higher silver costs; consequently, the price of a typical 500-watt module reached approximately 400 yuan ($57). Several leading solar companies, including Trina Solar Co., Ltd., warned this week that they still anticipate net losses in 2025. This guidance reveals that the industry downturn has not yet bottomed out, despite a year of industry self-discipline and government intervention to curb excess capacity and halt price wars. On Friday, the white metal traded around $91 per ounce, poised for a ninth consecutive monthly gain—which would mark the longest winning streak since records began in 1950. Silver paste is a critical material in solar panels, used to create conductive contacts that transmit the electricity generated by the cells. Manufacturers have been striving to reduce the amount of silver paste used to lower costs; according to BNEF data, the average usage per watt is projected to be 8.96 milligrams in 2025, down from 11.2 milligrams in 2024. These efforts are now accelerating. Longi Green Energy Technology Co.,Ltd. announced last week that it will soon begin replacing silver with base metals in its cells. Engineers can employ various methods to partially or fully substitute the silver in cells with cheaper copper, but moving too hastily carries risks. Customers typically demand warranties of 20 years or longer, and increasing the substitution ratio could shorten cell lifespan due to insufficient testing time for the new materials. "If a module fails after ten years but has a twenty-year warranty, the manufacturer could face massive compensation claims or even bankruptcy," said Gregor Gregersen, founder of precious metals dealer Silver Bullion Group. However, Shanghai Metals Market noted in a research report this week that even limited substitution, coupled with an expected slowdown in global module installations, could lead to an approximate 17% decline in the industry's silver consumption this year, based on an estimated annual demand of about 6,000 tonnes in 2025. Data from the Silver Institute shows that the solar industry accounted for about 17% of total silver demand last year, more than double the figure from a decade ago and comparable to usage in jewelry. A significant slowdown in consumption could threaten the white metal's prolonged sharp rally, which has been primarily driven by heightened speculative interest and a broader rotation of funds into commodities. Nikos Kavalis, Managing Director at consultancy Metals Focus, commented, "At current silver prices, more substitution is inevitable. While strong investment demand means this won't impact prices in the short term, it does signify that industrial consumption of silver will decrease in the future."
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