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U.S. Solar Panel Tariffs Won't Impact Silver Prices - Analysts

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(Kitco News) - The silver market and investors are taking in stride tariffs on solar panels imported into the U.S.; analysts say that they see the move having limited impact on prices through 2018.

Monday, President Donald Trump approved applying safeguard tariffs for the next four years on imported solar cells and modules. The sector would see a 30% tariff in the first year, a 25% tax in the second year, a 20% tax in the third year and a 15% tariff in the fourth year.

The Trump administration’s restriction on solar panels is a move to limit China’s growing dominance in the sector.

“Today, China dominates the global supply chain and, by its own admission, is looking to increase its capacity to account for 70 percent of total planned global capacity expansions announced in the first half of 2017,” said U.S. Trade Representative Robert Lighthizer in a press release.

While the tariffs are expected to impact the U.S. solar sector, analysts say that it won’t affect global demand, which will continue to provide long-term support for the silver market. Currently, silver is seeing some selling pressure as prices have been unable to hold the $17-an-ounce level. March silver futures last traded at $16.775 an ounce, down more than 1% on the day

The tariffs come as silver continues to underperform gold prices, with markets ignoring favorable supply and demand fundamentals as industrial demand for silver is expected to grow through 2018 while mine supply continues to shrink.

Maxwell Gold, director of investment strategy at ETF Securities, said solar-panel demand for silver is expected to remain strong, and he doesn’t see the U.S. trade restrictions as a game changer for the silver market.

“The U.S. market is a big component of solar demand but it’s not the largest,” he said. “If you look, most of the demand for solar panels is coming from developing countries like India and China. I don’t see demand for solar panels going away because of political issues in the U.S.”

Simona Gambarini, commodities economist at Capital Economics, said that it is still too early to determine the total impact the U.S. tariffs will have on the silver market. However, she added that she suspects the effect will be limited.

“Even if solar demand were strong, it wouldn’t have a material impact on silver demand; it is not the largest source of silver demand,” she said. “The sector has been thrifting silver, so they are using less and less of the metal.”

Instead of the solar sector, Gambarini said that silver investors need to pay more attention to the gold market as that will have the most significant impact on prices going forward.

“We think macroeconomic drivers will drive silver prices more than industrial demand,” she said. “We think silver will continue to underperform gold in 2018.”

Frank Yu, Asia-Pacific power and renewables principal consultant, Wood Mackenzie, said in a note to clients that they expect the tariffs to have little impact on the solar power sector.

“With Trump's duty barrier in place, China won't get hit as much as its domestic market is still growing strong. In addition, emerging markets such as India is likely to draw more Southeast Asian production to feed its solar capacity growth,” he said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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