Silver has both industrial and investment applications, meaning that silver demand comes from a variety of different places.
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Silver is known as the most versatile precious metal, and silver demand is driven by end uses ranging from silverware to medicine.
Industrial and technological uses for silver account for well over half of annual global demand, spurred by the metal’s strength, malleability and ductility.
In 2020, global physical silver demand decreased to 896.1 million ounces from 995.4 million ounces in 2019. The biggest drop in consumption came from the silver jewelry and silverware segments; however, last year brought greater silver consumption in the form of investment through silver bars and silver coins, as per the Silver Institute’s latest supply and demand report.
Moving forward, increased demand is expected to come from the solar energy sector, since the precious metal is a great conductor of both heat and electricity, making it perfect for use in solar panels.
With all of that in mind, here’s a look at four factors driving silver demand that silver investors should consider when they look at the market, according to the Silver Institute.
1. Industrial fabrication
Demand in 2020: 486.8 million ounces
Silver is the best electrical and thermal conductor of all the metals, and so it is used in industrial fabrication, including electrical applications such as conductors, switches, contacts and fuses.
In electronics, industrial silver is used mainly in multi-layer ceramic capacitors, in the manufacturing of membrane switches, in silvered film, in electrically heated automobile windshields, in conductive adhesives and in the preparation of thick-film pastes. In 2020, demand from industrial applications decreased from the previous year due coronavirus lockdowns, but in 2021 this segment of the market is expected to rebound and remain a huge driver of the white metal.
Aside from electronics, silver supply has been used by many other industrial applications. Solar panels, the automotive industry and brazing and soldering are the main industries in which demand for silver is currently increasing. Here’s a brief rundown of those three categories:
Solar panels — The use of silver in the fabrication of photovoltaic cells, more commonly known as solar panels or solar cells for solar power, is seen as an area of rapid growth in the short to medium term. It is expected that the US will have more than 100 GW of solar power installed by 2021.
Using silver as conductive ink, photovoltaic cells transform sunlight into electricity. In 2020, photovoltaic demand for silver rose to 101 million ounces, up from 98.7 million ounces the previous year.
Automotive industry — Every electrical action in a modern car is activated with silver-coated contacts. Basic functions such as starting the engine, opening power windows, adjusting power seats and closing a power trunk are all activated using a silver membrane switch.
Brazing and soldering — Adding silver to the process of soldering or brazing helps produce smooth, leak-tight and corrosion-resistant joints when combining metal parts. In addition, silver-brazing alloys are used widely in everything from air conditioning and refrigeration to electric power distribution.
Demand in 2020: 148.6 million ounces
Jewelry is often what most people think about when they consider silver demand. And for good reason — when it comes to jewelry, few materials are better suited for it than silver. Lustrous but resilient, the metal responds well to sculpting, requires minimal care and lasts for a lifetime.
While silver and gold possess similar working qualities, the white metal enjoys greater reflectivity and can achieve the most brilliant polish of any metal. The vast amount of silver supply from mine production gets turned into a form of jewelry. In 2020, silver jewelry fabrication decreased significantly under the economic strains of COVID-19, falling to 148.6 million ounces from 201.3 million ounces in 2019.
3. Bullion coins and silver bars
Demand in 2020: 200.5 million ounces
Minted silver coins were first used in the Eastern Mediterranean region in 550 BCE, and by 269 BCE the Roman Empire had adopted silver as part of its standard coinage. Silver was the main circulating currency until the 19th century, when it was gradually phased out of regular coinage.
Even so, silver is still used in some circulating coins, especially in American (the American silver eagle coin), Australian, Canadian, Mexican and Austrian bullion coins for investors. Silver consumption in terms of coin and bars increased from 185.7 million ounces in 2019 to 200.5 million ounces in 2020.
Demand in 2020: 32.6 million ounces
Sterling silver has been the standard for silver hollowware and silver flatware since the 14th century. Silver cutlery and other decor lasts for generations as it resists tarnish and is a traditional decoration in homes around the world. Base metal copper is mixed with silver to strengthen it for use as cutlery, bowls and decorative items.
Much like silver jewelry, in 2020 silver consumption from the silverware industry took a hit from the global pandemic, falling by nearly 50 percent from 2019 levels to 32.6 million ounces in 2020.
This is an updated version of an article first published by the Investing News Network in 2017.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.