SHANGHAI, Jan 3 (SMM) - In retrospect of 2022, the silver prices showed an inverted V-shaped trend. At the beginning of the year, the Russian-Ukraine war fuelled silver prices to surge to a high point, but then the prices edged down under the pressure brought by the Federal Reserve interest rates. Specifically, the Fed raised the interest rates multiple times in March, May, June, July, September, November and December. Nevertheless, the persistent rate hikes aggravated the market concerns about a economic recession, and thus silvers prices began to climb.
Silver
In 2022, the silver supply in the spot market was still in surplus as a whole, except for April-May and July when the supply became tight. The reason for the supply shortage in April-May was the lockdown in Shanghai. At that time, the inventories in Shenzhen and Zhengzhou were exhausted while the inventory in Shanghai could not be delivered to supplement the market supply. Therefore, the supply in the market basically came from the real-time production of smelters, and traders who had signed supply contacts with smelters had stable supply at stable prices. However, those who did not had to pay high premiums when purchasing goods. When the lockdown in Shanghai was lifted in June, the supply of goods in the market rose, and the premiums decreased. Then the supply became tight again in July-August. The main reason is that overseas stocks fell sharply due to its low prices and large demand in India, which also led to a domestic procurement boom. At the same time, there were spreading rumours about silver price hikes, while the purchase of silver was active amid smooth capital flow and low prices of silver. As such, smelters and silver manufacturers said that a shortage of goods occurred occasionally.
Photovoltaic
In 2022, due to the cost reduction and efficiency increase in the downstream enterprises, the processing fees for PERC silver paste slightly reduced. Therefore, the demand for domestically-produced silver powder increased, and the proportion of imported silver powder declined. Moreover, the low silver prices in the middle of the year also boosted the domestic demand for silver powder. Basically, the silver prices also affected the orders for silver-related products from downstream companies.
Electrical contact
In the first quarter of 2022, the silver demand from the electric contact sector remained normal due to the extension of orders in 2021. In the second quarter, the pandemic breakout in Shanghai and the downturn in the real estate sector caused the demand to slump. Orders picked up around December, but the surging infections at the end of the year still suppressed the demand.
Silver paste and silver powder for electronics application
Starting from the fourth quarter of 2021, the downstream enterprises of electronics application have seen accumulated inventory of consumer electronic product, which continued to rise in 2022, thus the priority was given to consuming inventory. Therefore, the demand for silver powder and silver paste for electronics application remained weak in 2022. Although the silver prices retreated in the middle of the year, the demand still remained sluggish.
In conclusion, silver demand in some sectors was limited in 2022, but as the optimised pandemic control measures improve the demand, SMM predicts that the demand for silver from its downstream sectors in 2023 will be better than that in 2022.
