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Silver and Industrial Demand - Part I by Jeff Lewis
Issue 92
Today's Gold/Silver Ratio: 42/1 Dn

Issue 115

Gold: $1545.70/ Silver: $36.67

SGS Notes: This week's article was too long for one newsletter, so we've split it up into 2 parts. This week will deal with historical and established silver demand; Part 2 will deal with Future Trends and silver's role in them. Meanwhile, if you haven't been watching silver and gold prices lately, you'll note that in the past week, we've seen a rise again in silver from the $34 range to the $36 range, and gold from the $1490s to the mid $1500 range and a drop of the gold:silver ratio of 2 points...

 

Silver and Industrial Demand - Part I

Jeff Lewis

I. Introduction

As you know, silver is much more than just a form of money. Although not often discussed in great detail, silver is actually an incredibly important and strategic industrial commodity. In fact, demand for silver by industry has increased dramatically in recent years and shows no signs of slowing despite price fluctuations.

Silver's incredible versatility - as a conductor, a catalyst, an antibacterial agent and much more - and unrealistically low prices have made it ideal for use in a huge number of products spanning countless manufacturing sectors. And the continued (relative) affordability of this super-metal points to dramatically increased demand in coming years.

As silver investors and educators, we feel that understanding silver's tremendous role(s) in industry (along side its importance as a store of wealth) is critical to understanding its past, present and future value. In fact, we are confident that you will find the insight and knowledge gained to be crucial for maintaining perspective as we head through the upcoming currency storm.

Ironically, if not miraculously, we find ourselves at the cutting edge of technology, while simultaneously, re-aligning with what also happens to be an excellent, proven, and historic form of wealth preservation - and money. Not to mention it is becoming increasingly scarce!

To broaden your understanding of silver's industrial applications, we're examining past and current industrial demand and looking forward toward what is expected to be a very bright future for this powerful and increasingly rare metal.

Growing Industrial Demand

As recently as 1990, total annual demand for silver by industry was about 273 million ounces (Moz). This represented about 39 percent of the total amount of silver fabricated each year. By 2000, industrial demand represented over 40 percent of total fabrication. And as of 2007, it had climbed to an all-time high of 465 Moz annually - or 55 percent of total fabrication - where, despite a downturn related to the global economic crisis that began in 2008, it is approximately today.

This upward trend is expected to continue, with annual industrial silver consumption growing from about 487 Moz in 2010 to approximately 666 Moz in 2015. This increase in demand will come from growth in both long-established industrial uses of silver and some intriguing new applications.

Established Industrial Applications

Silver's superiority as an electrical conductor makes it ideally suited for use in batteries and electrical contacts. Silver is used widely in automobiles (the list of core automotive applications is growing) and, in the form of a highly conductive paste, in photovoltaic cells. Photovoltaic cells - which convert solar energy into electricity - are already in great demand as concerns about dwindling fossil-fuel supplies grow. Photovoltaics also promises to play a key role in the drive toward clean energy sources in coming years. In fact, silver demand for use in photovoltaic cells is expected to double by 2015.

Emerging Industrial Applications

Thanks to silver's unmatched conductivity and relative affordability, it has become a critical element in the manufacture of a great variety of electronic devices - many of which have become important (and largely taken for granted) parts of our daily lives. Because silver-containing batteries manage energy output in very small packages, they are widely used in smart phones, laptops, and tablets, demand for which seems to be virtually limitless.

Other new applications capitalize on silver's powerful antibacterial properties. Silver-bearing products ranging from socks to cosmetics are appearing on the market with increasing frequency.

Because, in many of its industrial applications, silver performs much better than its possible replacements (if they exist), industry shows little interest in moving away from it toward less expensive or more abundant materials. So long as silver continues to be relatively inexpensive, and consumers don't lose their appetites for silver-containing products - which doesn't seem likely - industrial demand for silver will continue to grow.

 

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