GLOBAL DEMAND for silver could drag on prices in 2013, according to analysts, as the solar panel industry continues to suffer, denting a major new source of industrial use for the precious metal.
Widely regarded as more useful than gold for industrial purposes – and with 60% of annual off-take going to industry vs. less than 15% for gold – silver is a key component in many new technologies including RFID tags, biocides in hospital linen, and preservative treatments for timber, as well as photo-voltaic cells for converting solar energy into electricity.
However, the global market is "in oversupply" compared to projected 2013 demand by some 4,000 tonnes, according to Thomson Reuters. The "slowing solar panel sector" has seen "high profile names such as China's Suntech Power Holdings [fall] on hard times."
After enjoying strong subsidies from central government – subsidies which the European Union argue were illegal, enabling Chinese solar panel manufacturers to undercut Western suppliers unfairly – Suntech Power defaulted on more than $500 million of its total $2.2 billion in debt this March.
Its own suppliers have been hit by falling orders, and now "over capacity and profitability issues in China's solar panel industry [means] industrial demand for silver may decline this year," reckons HSBC analyst Howard Wen, speaking to Reuters.
French investment bank and bullion dealer Natixis adds that even as European governments pull subsidies for electricity consumers fitting solar panel capacity, the European Commission is now seeking to impose a 40% tariff on Chinese solar panel imports.
Already last year, says Natixis' commodity analysis team, the volume of new solar panels rose only "slightly" from 2011, with likely silver demand in 2012 totaling 3,100 tonnes.
Total silver investment demand in 2012 came in at 7,850 tonnes according to analysis done for the Washington-based Silver Institute by Thomson Reuters GFMS.
"Silver remains plagued by oversupply," reckons Robin Bhar, precious metals analyst at Societe Generale, "and the longer-term bear market in gold will take silver prices lower."