Photovoltaic industry drives silver demand, futures prices rise under the epidemic

Polaris Solar Photovoltaic Network News: Since the beginning of this year, under the influence of the epidemic, the price of precious metals has fluctuated violently. Among them, the price of silver with strong industrial products has been "halved" in mid-March, and the price of Shanghai silver has fallen to its lowest level since its listing. In order to better understand the current situation of the silver industry, during the "Industry Training Base" online metal week event held by the Shanghai Futures Exchange on April 13, Yang Jing, general manager of Shanghai Ruizhao, shared the current situation, future development and corporate business strategies of the domestic silver industry.

He said that domestic silver supply and demand are basically balanced, but physical demand is far lower than supply. As an associated metal, silver currently has three main sources in China: lead smelting accounts for about 40.9%, copper smelting accounts for about 28.5%, other mineral silver accounts for about 21.2%, and other sources of smelting, regeneration and recycling account for a small proportion. Official data shows that my country's silver production in 2019 was 19,063 tons. Among them, the output of refined silver has increased year by year with the increase in copper, lead and zinc production, but due to environmental protection policies, the output of recycling and recycled silver has dropped significantly in recent years. Overall, silver production still maintains growth trend.

In terms of consumption, as an industrial metal, silver has a wide consumption field and a particularly long chain. Among them, the photovoltaic industry accounts for the largest proportion. Other industrial consumption includes silver nitrate, electronic paste, electroplating, catalysts, etc. Statistics show that in 2019, the photovoltaic industry consumed 2,640 tons of silver, and other industries consumed 6,400 tons of silver, and the two categories consumed a total of 8,860 tons. At the same time, various types of exports in apparent consumption are mainly affected by changes such as processing trade, export tax rebates, etc. Exports have shrunk in the past two years. In 2019, the total number of exports in the three categories increased by 3,429 tons, showing a downward trend. In addition, from the perspective of inventory changes, including explicit inventory, non-delivery inventory and factory hidden inventory of delivery warehouses, the total inventory increased by about 2,100 tons in 2019.

Looking ahead to the supply and demand situation of the silver market this year and next year, Yang Jing believes that under the influence of the epidemic this year, the supply side will be less disturbed, and major copper, lead and zinc factories will continue to produce, and the supply of silver is expected to drop by 3%-5%. In terms of consumption, since most consumer companies are produced in stages and the resumption of production at terminal applications is slow, the consumption of silver has dropped significantly, and a decrease of 5%-10% is expected.

In the short term, he believes that the epidemic will have a greater impact on the financial market. Since the epidemic is in the development stage, countries will still take strict control measures, and the recovery of actual demand will be very slow. In the medium and long term, the epidemic will eventually be controlled and the market will rebound. As demand grows, silver prices will gradually turn to optimism in the future, but the final recovery remains to be seen. However, he said that under the current circumstances, the actual oversupply performance of the silver market will not have much impact on the price trend, and the impact mainly lies in the futures and spot premium structure and price difference.

Regarding the forward market supply and demand situation, Yang Jing said that the driving force of demand-side growth mainly comes from the three major areas of photovoltaic industry, petrochemical industry catalysts and high-tech electronic pastes, and other silver demand areas will continue to be weak. "In the long run, silver is in a relatively weak state. Although the precious metal halo of silver has gradually faded in recent years, and its industrial properties are prominent, such as having a good photoelectric and thermal effect, compared with other non-ferrous metals, silver is not cheap, and it is difficult to achieve rapid demand growth on a large scale in the industrial field." He said that despite the impact of the epidemic and the shrinking of some mineral resources, there is no need to worry about the silver supply side, and the pattern of oversupply of silver will not change for a long time in the future.

According to a reporter from Futures Daily, the domestic silver trading market is mainly divided into futures, spot and forward markets. Among them, the scale of silver futures trading in the Shanghai Futures Exchange is growing continuously, professional institutions and individual investors are actively participating, and the contract is relatively standardized, liquidity is constantly improving, and continuity is greatly enhanced, becoming an important tool to hedge price risks. He said that the epidemic has a great impact on the entire White Banking Industry. It is recommended that silver companies reasonably use the futures market for hedging to better hedge the risks of price fluctuations and achieve stable operation of the companies. In general, Yang Jing believes that the past era of wild growth of the white banking industry has been gone forever. Some companies that lack service concepts and stick to traditional trade models will inevitably be eliminated. In the future, companies should still focus on the long-term and standardize operations, achieve healthy competition in the industry, and promote long-term development of the industry.