* Silver demand from photovoltaics drops by a third in 2012
from 2011 record
* Demand drops even as solar panel sales increased about 9
* Long-term prospect bright for solar power and photovoltaic
By Rujun Shen
SINGAPORE, Dec 31 Surging silver prices have cut
demand from the solar power sector by a third this year from
2011's record highs, and the decline will continue next year as
the industry that uses nearly 5 percent of global silver
supplies scrambles to cut costs.
Silver paste is a key component in the photovoltaic panels
that dot the roof tops of houses and buildings to trap the sun
rays for electricity generation.
A nine percent increase in silver prices this year,
on top of a tripling in prices since end-2008, has forced many
panel manufacturers to reduce the amount of metal they use, even
though sales of panels are rising.
As a result, silver consumption by the industry plunged to
40 million ounces (1,244 tonnes) in 2012 after touching a record
of more than 60 million ounces in 2011, following years of rapid
expansion, according to metals consultancy Thomson Reuters GFMS.
Expectations that prices of the precious metal may rise as
much as 38 percent in 2013 will only encourage the industry to
further cut usage.
"It suddenly went from not counting for anything to 20
percent of cost for cell makers," said Charles Yonts, an analyst
at Credit Lyonnais Securities Asia, a Hong Kong-based
"Since it was so unimportant, the R&D engineers hadn't paid
any attention at all until last year to reduce silver
consumption. And from then, they've done it with a vengeance."
Silver demand slumped even as solar panel consumption
increased 8 percent in 2012 to about 30 gigawatts, according to
data from NDP Solarbuzz, a research and consulting firm.
Apart from rising costs, the solar power industry is also
grappling with overcapacity and tumbling product prices as panel
demand from the key European markets weakens as the euro zone's
economy slumps. Trade spats involving the United States, the
European Union and top panel maker China created more trouble.
The photovoltaic demand in 2011 was nearly ten times the
wattage in 2007, Solarbuzz said. A median forecast by industry
officials and analysts is for 10 percent growth next year.
"Gradually people have been using less silver and that trend
will continue in the future," said Finlay Colville, vice
president of NDP Solarbuzz.
"As the reduction in silver usage is faster than the growth
of the solar industry, there is going be a decline in silver
Poland's KGHM Polska Miedz S.A., BHP Billiton
and Fresnillo Plc, the world's top three silver
producers in 2011, contributed a combined output of 117.5
million ounces, about 15 percent of the world's total silver
mine production, according to GFMS.
Much of the world's silver is mined as by-products of other
metals, including copper, lead and zinc.
Because silver is the best conductor, solar panel
manufacturers have little choice but to rely on the metal, which
means long-term demand will remain resilient.
"In the short-term, the solar industry faces the problem of
oversupply. But in the long run, demand should grow steadily and
silver paste demand will grow, too, because substitution of
silver will not progress very fast," said Carl Lee, spokesman at
Gigasolar Materials Corp, a Taiwan-based paste maker.
Growing environmental awareness is also likely to boost the
industry's future prospects, solar panel manufacturers say.
"We are believers that this industry has a solid future and
will continue to get back longer-term to double-digit growth,"
said Ellen Kullman, chairman and chief executive officer of
leading silver paste supplier DuPont, at an earnings
conference call in late October.
"It's just not going to happen in 2013."