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The silver surge: unveiling the demand drivers

The silver surge: unveiling the demand drivers

Over 3,000 years ago, humans first separated silver from lead, marking the beginning of silver’s journey as a valued store of wealth. From the ancient Egyptians to the present day, silver has been a form of money and a symbol of enduring value.

Silver is not merely a store of value, currency, or decorative metal. It is a critical component in over 1,000 industrial processes, making it the second most widely traded commodity in the world after oil. Many analysts foresee a future characterized by unprecedented scarcity due to a prolonged shortfall in major capital investments into silver mining.

Industrial Powerhouse

Silver conducts heat and electricity better than any other element on Earth. It is used as a catalyst to support chemical reactions in the process of making medicines, plastics, inks, and other products. Fifty-six percent of the world’s silver supply is used in various industries. As modern manufacturing booms, so does the demand for silver – and with silver itself being consumed by many industrial processes, some prognosticators predict a day when the metal itself is extinct!

Eco-Friendly Revolution

Silver is at the heart of many eco-friendly technologies, from solar panels and electric vehicles to the batteries and semi-conductors that are central to clean energy. Silver is a central component shaping a cleaner and greener planet.

Healthcare Guardian

Beyond its industrial applications, silver’s antimicrobial properties and low toxicity are revolutionizing healthcare. Used to purify water and treat wounds, silver is an essential tool in the fight against antibiotic resistance. The metal is also a key component in medical devices, such as ventilators and catheters, ensuring safety in procedures and reducing cross-contamination.

Supply and Demand Dynamics

While the demand for silver is skyrocketing, the supply remains flat. Over the last three decades more silver has been consumed than has been mined. This is exacerbated by the fact that global mining supply also fell slightly in 2022, while recycling only increased slightly. Silver can be recycled from some e-waste (electronics and solar panels) and jewellery, but many industrial uses leave no silver residue to be re-used. In 2022, silver demand rose to 35,000 metric tonnes led by industry, jewellery, and investment – with global supply at only around 26,000 metric tonnes.

Increasing the supply to meet this rising demand will take time. Silver is mined and produced primarily as a biproduct of mining other metals including copper, lead, zinc and gold.  Approval and commencement of new mines involves lengthy processes including regulatory and environmental hurdles. For all these reasons, indications are that we are heading towards a supply shock of available silver, as demand is outstripping supply.

The Future of Silver

As the world embraces more electronic and eco-friendly technologies, many analysts predict the demand for silver to grow exponentially. The solar industry alone is projected to require over 20% of the world’s annual silver supply by 2027. With no viable alternatives to silver in semiconductors, the world faces a growing demand for this versatile metal.

Silver’s Resilience

Silver, once a form of currency in 700 BC, continues to stand the test of time. Some analysts predict a silver bull run as demand grows, with the Gold/Silver ratio sitting at 82:1. As government policies and global commitments to Net Zero increase, silver’s industrial demand remains insulated.

The ‘so-what’ for investors

Silver’s enduring journey from a precious form of currency over 3,000 years has led to its current status as not only a symbol of wealth, but also an indispensable component in industrial processes, and a key factor in the eco-friendly revolution and modern healthcare landscape.

As the world embraces sustainable technologies, many investors are keeping a keen eye on the demand for silver. Despite challenges in the supply and demand dynamics, silver looks to be a crucial asset in a rapidly evolving global landscape as the world continues the journey toward shaping a cleaner, greener, and technologically advanced future.

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