Policy Uncertainty Looms: Iran Risks Persist, Tariff Swings Hit Precious Metals

Soaring prices for silver are putting an extra squeeze on solar panel makers as they look to end more than two years of losses amid brutal competition in the sector.

Spot silver prices surged to a record above $93 an ounce this week, more than tripling over the past year. That means the trace amount of the metal used in solar cells now accounts for 29% of the total cost of a panel, up from just 3.4% in 2023 and 14% last year, according to BloombergNEF.

Panel makers are responding by raising prices and accelerating their plans to substitute silver with cheaper materials like copper. The added costs are coming as losses continue to mount throughout the industry, which is suffering from massive overcapacity after a frenzied factory buildout in the early part of the decade.

"Soaring commodity prices impose irresistible cost pressure on solar manufacturers," said BNEF analyst Yali Jiang. "This may drive up solar module prices, as manufacturers have little room to absorb additional costs after enduring two years of depressed market prices."

In the world's biggest market, Chinese module makers hiked prices to more than 0.8 yuan per watt this week, an increase of between 1.4% and 3.8% from last week, to reflect increased silver costs, according to InfoLink Consulting. That would put the price of a typical 500-watt panel at about 400 yuan ($57).

Several major solar companies, including Trina Solar Co. and Jinko Solar Co., warned this week they expect to post another year of net losses in 2025. The guidance suggests the sector's downturn has yet to bottom out, despite a year of industry self-discipline measures and a government-led campaign to curb excess capacity and halt price wars.

The white metal traded near $90 an ounce on Friday, and has gained for nine straight months — the longest streak in records going back to 1950.

Silver in paste form is a key material in solar panels, used to make electrical contacts to carry power generated by cells. Manufacturers have constantly sought to reduce the amount of the material as part of broader efforts to reduce costs, averaging 8.96 milligrams per watt in 2025, compared to 11.2 grams in 2024, according to BNEF.

Those efforts are now accelerating. Longi Green Energy Technology Co. last week announced it will soon begin substituting base metals for silver in its cells, joining others including Jinko Solar and Shanghai Aiko Solar Energy Co. in making the switch.

There are a number of methods engineers can use to substitute cheaper copper for some or all of the silver in cells, but going too far too fast can be risky for manufacturers. Customers usually require warranties for 20 years or longer, and increasing substitution raises the risk of a shorter lifespan because there's been less time to test the new material.

"If panels fail after a decade but the warranty is twenty years, the manufacturer could face huge liabilities that could lead to bankruptcy," said Gregor Gregersen, founder of Silver Bullion Group, a precious metals dealer.

Still, even limited substitution efforts, along with an expected slowdown in global panel installations, means the sector will likely reduce silver use by about 17% this year, from annual demand of about 6,000 tons in 2025, Shanghai Metals Market said in a research note this week.

The solar sector accounted for about 17% of total silver demand last year, more than double its share from a decade ago and on par with what's used to make jewelry, according to data from the Silver Institute. A substantial slowdown in consumption could threaten the long-term continuity of the white metal's blistering rally, much of which has been driven by increased speculative interest and a broader rotation into commodities.

"At silver's price levels today, a lot more substitution can happen," said Nikos Kavalis, managing director at consultancy Metals Focus. "I don't think this will affect price in the near term, given how strong investment demand remains, but it does mean less silver will be consumed by the industry going forward."

Source: Bloomberg Europe

Chinese banks processed a record volume of foreign currency sales for their clients in December, as expectations for a stronger yuan and seasonal demand converged to drive a massive shift into the local currency.

Data from the State Administration of Foreign Exchange released Thursday shows that onshore lenders sold a net $99.9 billion in foreign exchange on behalf of clients. This figure is more than six times the amount recorded in the previous month, reflecting a broad-based move by both corporations and investors to position for gains in the yuan.

What's Driving the Yuan's Strength?

The yuan has been the best-performing currency in Asia over the past month, strengthening by over 1% against the U.S. dollar and breaking below the key psychological level of 7 per dollar. The rally is underpinned by several key factors:

• Broad Dollar Weakness: A general decline in the U.S. dollar has provided a significant tailwind for the yuan.

• Swelling Trade Surplus: China's robust trade performance continues to generate strong foreign currency inflows.

• Economic Optimism: Positive sentiment around China's economic growth has supported advances in the country's onshore stock markets.

• Seasonal Demand: December typically sees a spike in currency settlement activities, as exporters convert foreign earnings into yuan to meet year-end operational needs.

A Shift in Market Expectations

Analysts see the data as clear evidence of a change in market sentiment. According to Xiaojia Zhi, an economist at Credit Agricole CIB, the figures point to "a notable shift in market expectation around the yuan toward appreciation." Zhi attributed this change to "weaker dollar expectations and more positive sentiment around China equities," noting a rotation out of U.S. tech stocks and into Chinese ones.

This market-driven appreciation appears to have the tacit approval of policymakers. The People's Bank of China has been setting the yuan's daily reference rate at progressively stronger levels, signaling its tolerance for a managed rise in the currency's value. Thursday's fixing was the strongest since May 2023.

Wall Street Revises Yuan Forecasts

As the yuan continues to climb, major global banks are upgrading their forecasts.

Morgan Stanley recently revised its first-quarter prediction for the yuan to 6.85 per dollar, a significant strengthening from its previous forecast of 7.05. Similarly, Australia & New Zealand Banking Group now expects the currency to reach 6.85 by the end of the year, while Macquarie Group anticipates a level of 6.8.

Future Catalyst: A Stockpile of Unsettled Dollars

Another potential driver for the yuan lies in the vast holdings of foreign currency held by Chinese companies. Zhongtai Securities estimates that exporters have accumulated approximately $930 billion in unsettled foreign exchange since 2022.

If these firms decide to convert a portion of this stockpile into yuan, it could create another powerful wave of support for the currency. "We expect firms to turn more willing to sell foreign exchange in 2026, which will form a positive conjunction with yuan appreciation," analyst Zhang Deli noted.

Figure 1: The oil tanker Nave Photon, carrying crude from Venezuela, is pictured docked at Port Freeport in Texas on January 15, 2026.

US Begins Selling Venezuelan Crude at a Premium

The United States is now selling Venezuelan crude oil at prices approximately 30% higher than the previous government achieved, Energy Secretary Chris Wright announced Thursday. This development follows an operation by U.S. special forces that captured former Venezuelan President Nicolas Maduro earlier this month.

Washington has already completed its first sale of Venezuelan oil, valued at around $500 million, a U.S. Department of Energy spokesperson confirmed. More sales are anticipated in the near future.

"We're getting about a 30% higher realized price when we sell the same barrel of oil than they sold the same barrel of oil three weeks ago," Wright stated at a U.S. Energy Association event, without providing specific price points.

Trump Outlines Plan for Future Sales and Investment

The initial oil sales are just the beginning of a longer-term strategy. President Donald Trump said last week that Venezuela would transfer between 30 million and 50 million barrels of crude oil currently under U.S. sanctions. He confirmed the oil would be sold at market rates, with the proceeds controlled by him to benefit both nations.

According to the Department of Energy, these oil sales are set to continue "indefinitely."

Furthermore, Trump announced last Friday a plan for oil companies to invest at least $100 billion to rebuild Venezuela's struggling energy sector. He added that the U.S. would provide security to help ensure investors see strong returns.

Oil Majors Remain Cautious Despite White House Push

To discuss the investment plan, President Trump met at the White House with leaders from major energy firms, including Exxon, Chevron, ConocoPhillips, Halliburton, Valero, and Maratho.

However, the industry appears hesitant. Exxon CEO Darren Woods reportedly told Trump that the Venezuelan market is "uninvestable" in its current condition. This caution is rooted in history; Venezuela seized assets from Exxon and Conoco in 2007, and the companies are still owed billions of dollars from arbitration cases.

Market Impact and The Political Hurdle

These developments are unfolding as global oil markets contend with a supply surplus that has been putting pressure on prices. As of 8:33 p.m. ET, Brent futures were up a slight 0.14% to $63.85 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 0.2% to $59.31.

Venezuela possesses the world's largest proven crude reserves, estimated at 303 billion barrels. Yet, years of underinvestment have decimated its production, which has fallen from a peak of 3.5 million barrels per day (bpd) in the 1990s to around 800,000 bpd today.

Baron Lamarre, co-founder of Index and former head of trading at Petronas, argued that the core issue isn't technical but political.

"Venezuela's oil problem is not technical, and it is not commercial, it's fundamentally human and political," he said. "Until investors have confidence in long-term political continuity, capital will remain cautious, incremental, and conditional."

China's economy hit its official 5% growth target for 2025, but a closer look reveals an unbalanced recovery. While record-breaking exports powered the nation's performance, stubbornly weak spending at home dragged growth to its slowest pace in three years, raising questions about the sustainability of its economic model.

In the final quarter of 2025, the country's gross domestic product (GDP) expanded by just 4.5%, highlighting a significant loss of momentum. This slowdown, influenced by the lingering effects of Donald Trump's trade war, underscores a critical weakness: China's reliance on selling to the world while its own consumers and businesses hold back.

A Record Trade Surplus Masks Domestic Fragility

The standout success story for China's economy in 2025 was international trade. The country achieved a massive trade surplus of nearly $1.2 trillion, meaning it sold far more goods abroad than it purchased.

This export boom was impressive, especially as sales to the United States dropped by about 20% due to trade tariffs. To compensate, Chinese exporters successfully pivoted to other global markets, increasing sales to Africa, Southeast Asia, Europe, and Latin America. These strong export figures were the primary driver that enabled Beijing to meet its annual growth target.

Inside China: Stagnant Spending and Deflation Risks

The strength in exports, however, paints a misleading picture of the economy's overall health. Back at home, the story was one of stagnation.

• Weak Consumer Demand: Chinese consumers were reluctant to spend, leading to sluggish retail sales.

• Low Business Investment: Companies showed little appetite for expansion, with fixed-asset investment—a major engine of economic activity—either falling or growing only slightly in 2025.

This persistent lack of domestic spending has pushed the economy toward deflation, a cycle of falling prices. When consumers and businesses expect prices to drop further, they delay purchases, which in turn slows down economic activity even more. The clear imbalance between a booming export sector and a sluggish domestic market points to fundamental structural issues.

Beijing's Policy Crossroads: How to Boost the Homefront

Chinese leaders have acknowledged the need for a strategic shift away from export dependency and toward an economy driven by domestic consumption. The challenge now is figuring out how to unlock spending and boost confidence among households and businesses.

One primary tool is monetary policy. China's central bank has already started cutting some interest rates to make it cheaper for families and companies to borrow money for homes, new ventures, and other purchases. These cuts have targeted key industries like technology and agriculture, but broader stimulus may be needed.

Looking ahead, the road appears challenging. Economists forecast that growth could slow further to around 4.5% in 2026. If the global demand for Chinese exports weakens, Beijing will have to rely more heavily on other policies, such as increased government spending, to prop up the economy.

For Chinese families and workers, this economic environment likely means slower income gains and fewer new jobs until consumer confidence recovers. Small businesses, from local stores to restaurants, will continue to face pressure if people choose to save rather than spend. For now, China's powerful export machine remains the key pillar holding its economy aloft.

US companies are more upbeat about doing business in China after a trade truce between President Donald Trump and Chinese leader Xi Jinping, according to a survey by the American Chamber of Commerce in China.

About 48% of respondents said they're optimistic about China's market growth over the next two years, up 11 percentage points from the previous year. Another 27% remained neutral.

Relations between Washington and Beijing have steadied after Trump and Xi met in South Korea on Oct. 30, where they struck a trade truce and agreed to pause tariffs on each other for a year. The two leaders are slated to meet four times in 2026, including a likely visit by Trump to China in April, though his recent tariff threats over Iran risk triggering new tensions.

Most surveyed firms remained downbeat about US-China relations over the next two years, but the level of pessimism moderated to 52% from 65% in the previous report, AmCham said.

The survey also challenges the idea that multinationals are rushing to move operations out of China amid concerns over US tariffs. About 71% of respondents said they have no intention to relocate their business overseas, citing China's strategic importance as a key reason for staying.

About 57% of US companies said they plan to increase investment in China, driven by the country's long-term market potential and strategic value. Those looking to scale back cited uncertainty in bilateral relations and worries about economic growth.

Companies' financial performance improved in 2025 as well. About 52% of firms reported being profitable or very profitable, up six percentage points compared to the previous year. The services sector recorded the strongest gains, with 61% of companies reporting profitability.

Still, many firms reported continued non-tariff barriers over the past year, including slower customs clearance, delays in licensing and approvals, as well as tighter export control regulations as a result of trade tensions.

The survey was conducted from Oct. 22 to Nov. 20, and drew responses from 368 member companies.

Source: Bloomberg Europe

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Source: Reuters