Silver is not only a precious metal but also has many industrial uses. As the green economy rises, the market expects that silver will play a key role in the coming boom. Now that silver is in short supply, experts believe a long-term structural shortage of silver is likely looming in the future.
Silver demand spans industry, investment, and jewelry. According to the World Silver Survey, more than half of silver is used in heavy industry and high technology including smartphones, tablets, automotive electrical systems, solar panels, and many other products and applications.
In particular, silver is essential for solar panel and electric vehicle production. Although the amount of silver needed per battery has been greatly reduced and a typical battery in 2021 will only contain approximately 20% of the silver of a battery made in 2010, solar installations have grown almost tenfold over the past decade and solar silver has risen from 5% of total demand in 2010 to over 10%. Silver usage is estimated to continue growing in 2022.
Other experts also believe that some new solar cells contain 50% less silver than current panels due to efficiency upgrades. If these next-generation solar panels are widely adopted, it could put downward price pressure on silver. However, increased solar panel production could offset demand reduction due to more efficient panel technologies.
Nonetheless, the market expects that the demand for silver in solar cells may stabilize after 2022 while the demand for silver in the automotive industry will rise. Auto production recovery is forecast to boost silver demand sharply as the wafer crisis eases.
Silver's electrical conductivity and corrosion resistance make it a necessity for conductors and electrodes and silver is used in almost every electrical connection in an electric vehicle. The same is true for all battery-operated consumer electronics. As countries move toward greener economies, formerly combustion-based appliances such as lawn mowers and pressure washers, may also switch to pure electricity, requiring batteries that use silver and increasing silver demand.
Other renewable energy sources such as wind and tidal power also use silver in various applications, as is the case in the low carbon nuclear power industry. The market expects that, due to the promotion of the green economy, there was a discrepancy in the supply and demand for silver last year. Tightening of silver supply is expected to continue this year and the deficit between supply and demand will even increase in the next few years, becoming a structural problem.
Silver prices are subject to economic changes given higher industrial usage. Morgan Stanley recently reported that silver is more sensitive to economic changes than gold due to increased industrial use, as gold has limited uses outside of jewelry and investments. Demand for silver tends to grow when the economy takes off.
The Silver Institute believes that silver prices disappointed investors with a negative 13% return in 2021 but its fundamentals are solid and the average price of silver in 2022 may be higher than it was in 2020, estimating 2022 silver pricing will average $25.75~26.50. Silver demand will grow 13% to 110 million ounces, driven by green economy initiatives.
(Image：Flickr/Brian Shamblen CC BY 2.0)