U.S. Solar Panel Tariffs Won't Impact Silver Prices - Analysts
(Kitco News)- The silver market and investorsare taking in stride tariffs on solar panels imported into the U.S.;analysts say that they see the move having limited impact on prices through2018.
Monday, President Donald Trumpapproved applying safeguard tariffs for the next four years on imported solarcells 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 thefourth year.
The Trump administration’srestriction on solar panels is a move to limit China’s growing dominance in thesector.
“Today, China dominates theglobal supply chain and, by its own admission, is looking to increase itscapacity to account for 70 percent of total planned global capacity expansionsannounced in the first half of 2017,” said U.S. Trade Representative RobertLighthizer in a press release.
While the tariffs are expected toimpact 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 tohold the $17-an-ounce level. March silver futures last traded at $16.775 anounce, down more than 1% on the day
The tariffs come as silvercontinues to underperform gold prices, with markets ignoring favorable supplyand demand fundamentals as industrial demand for silver is expected to growthrough 2018 while mine supply continues to shrink.
Maxwell Gold, director ofinvestment strategy at ETF Securities, said solar-panel demand for silver isexpected to remain strong, and he doesn’t see the U.S. trade restrictions as agame changer for the silver market.
“The U.S. market is a bigcomponent 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 likeIndia and China. I don’t see demand for solar panels going away because ofpolitical issues in the U.S.”
Simona Gambarini, commoditieseconomist at Capital Economics, said that it is still too early to determinethe total impact the U.S. tariffs will have on the silver market. However, sheadded 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 largestsource of silver demand,” she said. “The sector has been thrifting silver, sothey 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 goldmarket as that will have the most significant impact on prices going forward.
“We think macroeconomic driverswill drive silver prices more than industrial demand,” she said. “We thinksilver will continue to underperform gold in 2018.”
Frank Yu, Asia-Pacific power andrenewables principal consultant, Wood Mackenzie, said in a note to clients thatthey expect the tariffs to have little impact on the solar power sector.
“With Trump's duty barrier in place, China won'tget hit as much as its domestic market is still growing strong. In addition,emerging markets such as India is likely to draw more Southeast Asianproduction to feed its solar capacity growth,” he said.
By Neils ChristensenFor Kitco News
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