[SMM Analysis] 2024 Prices to Rise First Then Stabilize, Silver Demand Starts Strong but Ends Weak

In 2024, silver prices fluctuated significantly. The annual average price of SMM 1# silver was 7,216.24 yuan/kg. In H1, silver experienced a period of sharp price increases, with the average price of SMM 1# silver at 6,784.91 yuan/kg. Starting in March, silver prices began to rise, with an increase of over 1,000 yuan/kg in April. The upward trend continued in May, reaching the H1 peak, and further climbed in June. However, in July-August, influenced by Japan's interest rate hikes and the market's sell-off of financial assets to recover liquidity, silver prices declined. In H2, the average price of SMM 1# silver was 7,619.96 yuan/kg. On a monthly basis, silver prices fluctuated sharply in H1. Although the overall average price in H2 was higher than in H1 due to limited low prices, price volatility was relatively moderate compared to H1.
In terms of silver demand in 2024, PV silver demand continued to grow. According to SMM statistics, PV silver consumption in 2024 reached 5,876 mt, up 27.7% YoY. This significant growth in PV silver demand was primarily driven by strong downstream demand in H1 and the transition from PERC to TOPCON technology, which increased silver powder usage. Additionally, the accelerated substitution of domestic silver powder due to cost considerations further contributed to the growth. Despite the high silver prices, PV silver demand in 2024 remained robust. The emergence of LECO technology at the end of 2023 provided effective technical support for market transformation and cost reduction, while the soaring silver prices motivated the market to reduce costs rapidly. As a result, silver demand growth this year did not meet the expected YoY increase of 40%-50%. Meanwhile, facing rising cost pressures, downstream sectors increasingly substituted imported products with domestic ones, although imported silver powder was still required for higher efficiency demands.
In the electrical alloy industry, market stockpiling in H1 was boosted by national subsidies for home appliances, leading to an increase in orders compared to the previous year. However, due to the significant rise in silver prices, the growth in silver consumption was less than that of other base metal product orders. At the end of 2023, the closure of small and medium-sized enterprises and high-cost enterprises led to further concentration of orders among top-tier enterprises after resource integration.
In the electronics industry, the semiconductor sector performed well in terms of industry orders this year, especially in H1. However, as semiconductor companies also focused on cost reduction and efficiency improvement, the primary boost in raw materials did not come from silver. Nevertheless, related companies benefited from the positive impact of semiconductor orders.
In the jewelry industry, silver prices remained on a continuous upward trend in 2024. Market orders during traditional demand periods, such as March-April and the September-October peak season, were moderate. However, due to the sustained price increases, consumer activity in Shenzhen Shuibei Market was far below 2023 levels. On the other hand, supported by high prices, market recycling performed well.

Overall, industrial demand for silver was relatively active in H1. The continuously rising silver prices could not deter market purchasing demand, supporting domestic silver prices to exceed overseas tax-inclusive silver prices in June and July. Strong demand drove domestic enterprises to opt for spot imports after balancing domestic and overseas markets. However, in H2, as both prices and demand declined, the demand trend weakened significantly.

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