Silver Price Could Benefit from Increased Solar Sector Demand

Last week, Resource Investing News had the chance to speak with Andrew Leyland of Thomson Reuters GFMS about the World Silver Survey 2015, an extensive report prepared annually by GFMS on behalf of the Silver Institute. 

While Leyland provided significant insight into key silver price, supply and demand trends for 2014, also giving some information on what may lie in store for 2015, his thoughts on silver demand from the solar industry are particularly interesting, especially in light of an article published Monday by The Telegraph.

Here’s a look at what silver demand from the solar industry currently looks like, and why it may increase moving forward.

Silver demand in 2014

Speaking about 2014 silver demand, GFMS states in its report that it clocked in at 1,066.7 million ounces, the fourth-highest level since 1990.

In terms of where exactly that demand came from, the firm notes that coins and bars and silverware are key sources of silver demand, though offtake from those sectors was weaker in 2014 than in 2013. Interestingly, silver demand from the jewelry sector saw a slight uptick in 2014, reaching a record 215.2 million ounces. The rise there was largely driven by increased demand from India, which offset “sizable falls in China and Thailand.”

Those sectors certainly require a lot of silver, but they’re dwarfed by industrial fabrication demand, which accounted for 594.9 million ounces, or 56 percent, of all physical silver demand in 2014. Leyland spoke briefly about a couple of fields in that sector to watch, with one being the wearable tech market. “Certainly it’s a growing market, [and] we see continuing movement towards wearable tech,” he said.

However, as mentioned, he’s also got an eye on the solar industry. It’s not a new source of demand for silver, but according to Leyland, silver offtake from the solar industry rose in 2014. Indeed, GFMS states that it came to 59.9 million ounces, up 7 percent from 2013. The rise is the first in two years, and the firm has attributed it to “a combination of less aggressive thrifting of silver content per solar cell and an 11% rise in solar panel installations.”

Leyland is encouraged by those factors, and concluded, “silver’s quite well placed to benefit from any increase in underlying demand for solar panels.”

Solar demand set to surge?

The Telegraph’s Monday article on silver demand from the solar industry helps build a picture of exactly how much demand from that sector could be set to increase.

It states that according to IHS, demand for solar power is set to rise to 57 gigawatts of electricity in 2015, an increase of 30 percent. In terms of where that demand will come from, China will be a key driver — the Asian nation is set to install around 17 gigawatts of solar capacity by the end of the year. Furthermore, the news outlet notes that the 7-percent growth rate seen in 2014 “is expected to increase over the next decade.”

One catalyst for an increase, states The Telegraph, could be the development of a binding agreement on climate change amongst major nations. Key countries are set to meet this year in Paris to discuss that issue, and if a deal is signed it could “result in already strong demand for PV cells increasing further as major developing economies such as India and China increase the contribution that solar makes to their overall power generation network.”

Whether or not that happens of course remains to be seen, but with the silver price still at a fairly low level, it’s no doubt encouraging for investors to know that demand from at least one sector may be set to rise. The potential Paris climate change agreement will definitely be a catalyst to watch.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Related reading: 

Thomson Reuters GFMS: Silver Price to Average $16.50 in 2015