The domestic silver nitrate capacity expanded as scheduled, and the processing fee faced pricing resistance once again [SMM Analysis]

According to SMM's survey, the expansion of domestic silver nitrate capacity is primarily driven by the demand for silver powder and silver paste in the downstream PV sector. However, as silver nitrate is classified as an explosive precursor, its capacity expansion requires stringent qualification management. Therefore, the newly added and stably operating silver nitrate capacity mainly comes from the expansion of new production lines by existing qualified enterprises, as well as the newly applied production qualifications by downstream silver powder producers to extend the industry chain and secure raw material supply.

Since 2024, with the commissioning of new production lines actively expanded by silver nitrate producers, suppliers have generally mentioned intensified competition within the industry, with quarterly or monthly negotiations for customer TC reductions.

According to SMM market exchanges, domestic silver prices rose in Q1 2025, even breaking through the significant resistance level of 8,300 yuan/kg. However, the essential operations related to the PV industry chain did not decline due to the silver price increase, and there was no issue of terminal transmission blockage. In contrast, the processing fees for intermediate processing steps such as silver nitrate and silver powder/paste faced renewed pricing pressure. Industry chain-related enterprises indicated that the fluctuations in processing fees were mainly influenced by the imbalance between the release of new silver nitrate capacity and the slowdown in end-use consumption growth, rather than the rise in silver prices.

Company A stated that the processing fee for its tolling silver nitrate could be priced at 26 yuan/kg, but the normal market quotation remains between 28-29 yuan/kg. Company B mentioned that there has indeed been a slight reduction in recent negotiations, with current processing fee quotations ranging between 26-28 yuan/kg. Company C revealed that, as the group possesses silver powder/paste production lines, its silver nitrate products are mainly used for internal supply, with a small number of export orders produced based on demand and quoted at a premium of 20-25 yuan/kg.

Additionally, a silver nitrate enterprise noted that due to the mismatch in the industry chain's operating cycle during the Chinese New Year holiday, smelters typically accumulate silver ingot inventories. Therefore, the actual delivered discounts and a small amount of average-priced raw material inventory in Q1 could offset the profit contraction caused by the slight reduction in processing fees.

SMM also learned that silver nitrate enterprises pay significantly more attention to silver price fluctuations than to changes in processing fees. This is mainly due to the investment attributes of metallic silver, whose daily change far exceeds the fluctuations in processing fees for intermediate processing enterprises.