The solar industry’s latest cost-saving breakthrough is colliding with a bottleneck in the metals market. Driven by volatile silver prices, high-efficiency panel makers are pushing to replace silver paste with copper-based alloys.
However, the copper itself is becoming scarce. Chile, the world’s top producer, is under pressure from depleting mines, declining ore grades, environmental risks, and repeated operational setbacks.
The stress of the industrial metal is visible on charts. Copper hit an all-time high of $6.67 per pound in June, before easing to around $6.32. Global X Copper Miners ETF (NYSE:COPX) is up 7.75% year-to-date and 77.54% year-over-year.
The Copper Paradox
China’s largest solar manufacturer, Longi Green Energy, started production at a 21-gigawatt back-contact cell line in Shaanxi, according to PV Magazine. The company is using Alloy Contact Matrix technology to replace conventional silver paste with a copper-based alloy contact system.
Bloomberg reported that Longi described the facility as “a key milestone in the large-scale implementation of its next-generation cell technology.”
Longi says ACM cells have reached 27.6% conversion efficiency, certified by Germany’s Institute for Solar Energy Research Hamelin, while modules have hit 672 watts in TÜV Rheinland tests.
The main commercial prize, however, is cost, as silver paste remains one of the biggest non-silicon expenses in high-efficiency back-contact cells.
Silver’s spot price has since cooled — down over 50% from its all-time high of $121.64 per ounce to around $58 per ounce — but manufacturers are less concerned with the current price than with insulating themselves against a metal prone to sharp swings and a multi-year supply shortfall.
The extent of the recent selloff is most evident in iShares Silver Trust ETF (NYSE:SLV), which is down about 20% year-to-date, even as physical inventories tighten.
Chile’s Strain
Meanwhile, copper’s supply is already struggling – even without the additional demand from electrification-driven substitution.
Codelco, the largest copper producer on the planet, is servicing some $25 billion in debt after output slid to a 28-year low. New Chairman Bernardo Fontaine has made clear he wants returns over sheer volume.
“Our results have been weak, and production has fallen below estimates for the past seven years,” Fontaine told El Mercurio.
May figures show the extent of the stress. Codelco’s copper output fell 18.3% year-on-year to 106,300 tons, BHP Group Limited (NYSE:BHP)-controlled Escondida dropped 17.6% to 108,800 tons, and Collahuasi slid 19.3% to 31,000 tons.
Severe winter storms have added another risk, threatening mines, ports and transport routes in a country that accounts for almost a quarter of mined copper supply.
The Closed-Loop Trap
But the interconnectedness of metal production is where the substitution strategy meets its limit. Because about 70% of silver is mined as a byproduct of copper, lead, zinc, and gold, silver mine supply cannot simply respond to higher prices — it is bound to base-metal economics.
Constrained copper output therefore drags down byproduct silver supply, and the pivot to copper cannot independently escape the silver squeeze it was designed to solve.
The evidence of that squeeze is already on the books. COMEX registered silver holdings have fallen more than 75% from their 2020 peak to 79.9 million ounces.
According to Reuters, the Silver Institute projects a sixth consecutive annual deficit of 46.3 million ounces in 2026, and the cumulative shortfall since 2021 is roughly 762 million ounces. (The paradox of a deficit alongside a falling price largely reflects dollar strength and a shifting demand mix.)
Solar silver demand is forecast to fall 19% in 2026 to about 151 million ounces as copper metallization spreads. But trading silver for copper doesn’t sever solar’s tie to constrained mining; it simply moves the industry one link along the same chain.
Image via Shutterstock
Login to comment