Domestic Silver Nitrate Capacity Expansion Released as Scheduled Processing Fees Renegotiated [SMM Analysis]

According to SMM, the expansion of domestic silver nitrate capacity was driven by the demand for PV silver powder and silver paste. However, as silver nitrate is an explosive precursor, its production requires strict qualification control. Therefore, the newly added and stably operating silver nitrate capacity mainly comes from the expansion of new production lines by existing qualified enterprises and the new production qualifications applied for by downstream silver powder producers to extend the industry chain and ensure raw material supply. Since 2024, with the operation of new production lines actively expanded by silver nitrate producers, suppliers generally mentioned cut-throat competition, experiencing negotiations for lower processing fees on a quarterly or monthly basis. SMM's market communication revealed that after the domestic silver price rose and even broke through the key resistance level of 8,300 yuan/kg in Q1 2025, the essential operations related to the PV industry chain did not see a decline due to the increase in the metal silver price, and there was no issue with the terminal transmission of the silver price itself. However, the processing fees for intermediate processing stages such as silver nitrate, silver powder, and silver paste were once again squeezed through negotiations. According to relevant companies in the industry chain, the rise in silver prices was not the main reason for the changes in their processing fees; instead, the concentrated release of new silver nitrate capacity and the imbalance between this and the slowing end-use consumption were the key factors leading to squeezed processing fees and cut-throat competition. Company A stated that the processing fee for toll manufacturing of silver nitrate could be priced at 26 yuan/kg, but the normal market quotation remained at 28-29 yuan/kg. Company B indicated that recent negotiations indeed saw a slight decrease, with current processing fee quotations at 26-28 yuan/kg. Company C noted that, due to having silver powder and silver paste production lines within the group, the main focus was on internal supply of silver nitrate products, with a small amount of export orders produced based on demand, quoted at a premium of 20-25 yuan/kg. A silver nitrate company mentioned that, due to the mismatched production cycles during the Chinese New Year holiday, smelters experienced a customary inventory buildup of silver ingots, so the actual factory discount for refined silver raw materials and a small amount of average-priced inventory in Q1 could offset the profit contraction caused by the slight decrease in processing fees. Additionally, SMM's market communication found that silver nitrate companies paid more attention to the fluctuations in silver prices than to changes in processing fees, mainly because the investment nature of silver itself led to daily price changes far exceeding the processing fees of intermediate processing enterprises. Check SMM Precious Metals Spot Prices