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Silver Deficit Could Flip to Surplus in 2027 as Solar Demand Falls
Silver's multi-year supply deficit could give way to a surplus as early as 2027 as photovoltaic manufacturers sharply reduce silver use, mine supply improves and inventories rebuild across major trading centers, according to Deutsche Bank. The bank expects spot silver to average about $70 per ounce in the second quarter of 2027.
By Paul Ploumis
Published October 7, 2026
Summary Points
- Market balance: Deutsche Bank says silver could move from deficit into surplus as early as 2027.
- Current deficit: The Silver Institute estimates a 40.3 million-ounce deficit for 2025 and 46.3 million ounces for 2026.
- Solar demand: Deutsche expects global silver use in solar applications to fall by more than 20% in 2026.
- China: Silver demand from China's photovoltaic sector could decline by roughly one-third.
- Thrifting: Silver consumption per solar cell is estimated to fall about 17% this year as manufacturers reduce loadings and substitute copper.
- Inventories: London vaults held about 914 million ounces of silver at the end of August, while Deutsche estimates more than 300 million ounces were freely available.
- Price outlook: Deutsche Bank expects spot silver to average approximately $70/oz in Q2 2027.
MONTREAL (Scrap Monster): Silver's prolonged structural deficit could be approaching an end as weakening industrial demand and rebuilding inventories reshape a market that experienced extraordinary shortages and price volatility over the past two years.
Deutsche Bank now sees the possibility of a physical silver surplus as early as 2027, driven primarily by lower photovoltaic demand, continued metal thrifting, substitution and improving supply availability.
The call represents a significant change from the scarcity narrative that dominated the silver market through 2025 and early 2026.
Daniel Ghali, Deutsche Bank's head of metals research, expects spot silver to average roughly $70 per ounce in the second quarter of 2027.
SCRAPMONSTER EDGE
The biggest change is not simply higher mine supply. It is demand destruction. Silver's price surge made the metal expensive enough that solar manufacturers accelerated efforts to use less of it. Thinner contacts, silver-coated copper pastes and direct copper substitution are now reducing the amount of silver required per solar cell, weakening one of the metal's fastest-growing demand sources.
Silver Deficit Has Narrowed Sharply Since 2022
The physical silver market has spent several consecutive years in deficit, but the size of the shortfall has already fallen significantly from its peak.
The deficit reached approximately 237 million ounces in 2022, one of the largest annual shortfalls on record.
By 2025, the deficit had narrowed to approximately 40.3 million ounces, according to the World Silver Survey 2026 produced by Metals Focus for the Silver Institute.
The Silver Institute currently forecasts a 46.3 million-ounce deficit in 2026, which would mark a sixth consecutive year in which total silver demand exceeds supply.
| Year | Silver Market Balance | Market Read |
|---|---|---|
| 2022 | ▼ ~237 Moz deficit | Peak structural shortfall |
| 2025 | ▼ 40.3 Moz deficit | Deficit narrowed sharply |
| 2026 Forecast | ▼ 46.3 Moz deficit | Silver Institute / Metals Focus forecast |
| 2027 Outlook | Potential surplus | Deutsche Bank scenario |
The distinction between those forecasts matters.
The 2025 and 2026 deficit figures come from the Silver Institute and Metals Focus. Deutsche Bank's newer analysis looks further ahead and argues that the combination of falling industrial consumption and improved availability could push the market into surplus next year.
Solar Demand Could Fall More Than 20%
The biggest change is occurring in the photovoltaic industry.
Silver has traditionally been used in conductive pastes applied to solar cells because of its exceptionally high electrical conductivity.
But record silver prices dramatically increased the material's share of solar-module production costs.
Deutsche Bank estimates that global silver consumption in solar applications could decline by more than 20% during 2026.
Demand from China's solar manufacturing sector could fall by approximately 33%.
That would represent a major reversal for a sector that had become one of the most important drivers of global industrial silver demand.
Silver Use Per Solar Cell Falling About 17%
Solar companies are responding to high silver prices by accelerating material-saving technologies.
Manufacturers are using:
- thinner conductive contacts;
- lower silver paste loadings;
- silver-coated copper pastes;
- copper electroplating; and
- cell designs requiring less precious metal.
Deutsche Bank estimates that the quantity of silver used per solar cell will fall by approximately 17% in 2026.
The Silver Institute has independently identified the same broader trend. Its World Silver Survey says silver loadings per unit fell by more than 15% in 2025 as silver-coated copper and other substitution technologies gained market share.
The Institute expects further thrifting and substitution during 2026.
SOLAR COST PRESSURE
Silver's own price rally accelerated its substitution risk. Earlier in 2026, silver represented more than 30% of solar-cell manufacturing costs in some applications, compared with less than 10% at the beginning of 2025. That provided a powerful economic incentive for manufacturers to reduce the metal content of each cell.
Silver's $121 Record Accelerated the Shift
Silver prices experienced one of the most volatile periods in the metal's modern trading history.
The metal traded near $30 per ounce at the beginning of 2025 before rallying sharply through the year and into early 2026.
Spot silver reached an all-time high of approximately $121.64/oz on January 29, 2026.
The rally then reversed dramatically.
Silver suffered its largest one-day decline in LSEG records dating to 1982 immediately after the January peak and subsequently continued to retreat.
Prices traded into the mid-$50s during the June-July correction before recovering toward the low-$60 range.
Silver was trading around $61/oz in early October, approximately half its January record but still well above levels seen a year earlier.
| Silver Price Reference | Approx. Level |
|---|---|
| Start of 2025 | ~$30/oz |
| January 29, 2026 Record | $121.64/oz |
| Mid-2026 Correction | Mid-$50s/oz |
| Early October 2026 | ~$60–$61/oz |
| Deutsche Q2 2027 Forecast | ~$70/oz average |
London Silver Inventories Rebuild to 914 Million Ounces
Inventory availability has also improved substantially.
London Bullion Market Association data show that London vaults held 28,431 metric tons of silver at the end of August 2026.
That equals approximately 914 million troy ounces.
London holdings increased 0.77% from July.
The total includes silver held by commercial vault operators within the London market and provides an important measure of metal supporting physical over-the-counter trading.
Not all of that silver is available for immediate sale because large portions may be held by exchange-traded funds or long-term investors.
Deutsche Bank estimates that more than 300 million ounces of the London total is currently freely available for purchase.
The bank says freely available London inventory has increased roughly 70% since October 2025 and reached its highest level since late 2024.
COMEX and Shanghai Stocks Also Rebuilding
The improvement in availability is not confined to London.
Deutsche Bank points to increasing inventories at COMEX warehouses in the United States and trading venues in Shanghai as further evidence that last year's acute physical shortage has eased.
Publicly reported COMEX silver stocks were around 338 million ounces in early October.
When combined with London's approximately 914 million ounces, visible metal across the two major Western vault systems exceeds 1.25 billion ounces.
That does not mean the entire inventory is immediately available to industrial consumers. Ownership, warrant status, ETF holdings and location all affect real market liquidity.
However, it represents a much larger physical buffer than was available during the tightest period of 2025.
October 2025 Shortage Has Largely Eased
The change is particularly striking when compared with October 2025.
At that time, tight readily available London inventories pushed silver lease rates sharply higher and triggered a scramble for physical metal.
The Silver Institute described the episode as an unprecedented liquidity squeeze.
Metal subsequently flowed back toward London, helping normalize market conditions.
Deutsche Bank now argues that concerns about outright physical scarcity have largely faded as inventories rebuilt across multiple jurisdictions.
Mine and Recycled Supply Add to the Balance
Supply is also contributing to the shift.
The Silver Institute expects total global silver supply to remain around decade highs in 2026.
Its earlier annual outlook projected mine production near 820 million ounces, supported by additional output from operations in Mexico, China, Canada and other producing countries.
Recycling has become increasingly important as elevated silver prices encourage the return of jewelry, silverware and industrial scrap.
Deutsche Bank identifies recycling and metal returning from private holdings as additional contributors to improving physical availability.
Industrial Demand Is No Longer Growing at Earlier Rates
Solar is the most visible example of weaker demand, but the slowdown extends beyond photovoltaics.
The Silver Institute forecast total industrial fabrication demand to decline in 2026 after years of exceptionally strong growth.
Consumer electronics have faced cyclical pressure, while high metal prices have encouraged manufacturers across several industries to reduce material use where technically possible.
That matters because industrial demand had become one of the main reasons the silver market remained in persistent deficit.
If industrial consumption declines at the same time that mine output and recycling remain firm, the physical balance can shift quickly.
A Surplus Does Not Necessarily Mean Lower Silver Prices
Deutsche Bank's surplus call does not translate directly into a bearish $50-or-lower price forecast.
The bank still expects silver to average approximately $70/oz during the second quarter of 2027, above current levels near $60–$61.
The reason is silver's dual role.
Unlike many industrial commodities, silver is also a precious metal and investment asset.
Its price therefore depends not only on mine supply and fabrication demand but also on gold prices, interest rates, currency moves, investment flows and geopolitical risk.
A better-stocked physical market could reduce the probability of another violent scarcity-driven spike without necessarily forcing the price materially lower.
SURPLUS DOES NOT EQUAL PRICE COLLAPSE
Deutsche's $70 forecast is above today's silver price even though the bank sees a possible surplus. Its argument is that the extreme scarcity premium and volatility of early 2026 should fade, not that investment demand for silver disappears altogether.
Silver May Underperform Gold if Scarcity Premium Fades
Deutsche Bank expects improving metal availability to have an important relative-price effect.
If the silver market moves from chronic physical tightness toward balance or surplus, the metal could struggle to match gold's performance even in a favorable precious-metals environment.
That would put upward pressure on the gold-to-silver ratio, which fell sharply during silver's early-2026 surge.
Ghali also expects volatility to become more constrained than during the extreme moves recorded around the January peak.
China Remains the Key Demand Risk
The biggest uncertainty in Deutsche Bank's outlook remains China.
China dominates global solar manufacturing and therefore has an outsized influence on silver's photovoltaic demand.
A roughly one-third drop in Chinese solar silver usage would materially change the industrial balance.
But stronger-than-expected installations, slower adoption of copper substitution or renewed manufacturing growth could preserve more silver consumption than Deutsche currently assumes.
Chinese silver prices have also traded at premiums to Western markets at various points, suggesting regional demand has not disappeared.
Market Read
Silver's fundamental story has changed substantially in less than a year.
In late 2025, traders were focused on whether enough physical metal was available in London. In early 2026, that scarcity helped contribute to a speculative and physical rally that pushed prices above $121 per ounce.
By October, the picture is almost the reverse.
London inventories have rebuilt, COMEX and Shanghai stocks have increased, silver consumption per solar cell is falling and one of the world's largest photovoltaic industries is reducing its use of the metal.
The Silver Institute still expects a 46.3 million-ounce deficit for 2026, meaning the market has not yet moved into outright oversupply.
Deutsche Bank's argument is that current trends could complete that transition in 2027.
For producers, recyclers and industrial consumers, the most important variables will be solar-sector substitution, mine growth, recycling flows and whether investment demand absorbs metal that is no longer required by manufacturers.
If Deutsche's forecast proves correct, silver may enter 2027 with considerably more available metal and less scarcity-driven volatility, even while prices remain well above their pre-rally levels.
Forecast note: The 2027 surplus scenario and $70/oz Q2 forecast are Deutsche Bank estimates. The 2025 and 2026 market-deficit figures are from the Silver Institute/Metals Focus. Forecasts are not guaranteed future prices or ScrapMonster investment recommendations.
