4 Factors That Drive Silver Demand (Updated 2023)
Silver has both industrial and investment applications, meaning that silver demand comes from a variety of different places.
Silver is known as the most versatile precious metal, and demand is driven by end uses ranging from silverware to medicine, as well as industrial and technological applications, which account for well over half of annual global demand.
Global physical silver demand in 2022 is expected to have increased by 16 percent over the previous year's level of 1.046 billion ounces to reach a record high of 1.21 billion ounces, as per the Silver Institute’s December 2022 supply and demand report.
Significant rises in consumption are seen coming from the silver jewelry and silverware segments; significantly, silver demand in the form of bar and coin investment is expected to have risen by 18 percent to a record high of 329 million ounces in 2022.
Moving forward, increased industrial demand is expected to come from the push toward more renewable energy sources — in particular, silver demand should benefit from vehicle electrification, the adoption of 5G technologies and the solar energy sector. The precious metal is a great conductor of both heat and electricity, making it perfect for use in solar panels.
In 2023, the Silver Institute expects global demand for silver to slip to 1.15 billion ounces, but that would still be the second highest year ever for worldwide silver consumption. With all of that in mind, here’s a look at four factors driving silver demand.
1. Industrial fabrication
Expected demand in 2022: 539 million ounces
Silver is the best electrical and thermal conductor of all the metals, and so it's no surprise that it's used in industrial fabrication. In 2020, demand for silver from industrial applications decreased compared to 2019 due to COVID-19. However, in 2021 this segment of the market rebounded by 8 percent, and it is forecast to have grown by another 5 percent in 2022.
In electronics, industrial silver is used mainly in multi-layer ceramic capacitors, membrane switches, silvered film, electrically heated automobile windshields, conductive adhesives and the preparation of thick-film pastes.
Electronics is expected to remain an important driver for silver going forward, as per the Silver Institute, which expects overall industrial silver consumption to reach 550 million ounces in 2023. But of course silver has industrial applications outside electronics — these include solar panels, the automotive industry and brazing and soldering.
Here’s a brief rundown of those three categories:
Solar panels — Using silver as conductive ink, photovoltaic cells transform sunlight into electricity. These cells are combined to form solar panels. The use of silver in the fabrication of photovoltaic cells, also known as solar cells, is seen as an area of rapid growth in the short to medium term. In fact, SolarPower Europe expects that global solar power installations will more than double in just three years to reach 2.3 terawatts by 2025, up from only 1 terawatt in 2022.
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 power trunks are all activated using a silver membrane switch. Furthermore, data from the Silver Institute shows that, depending on the model, battery electric vehicles contain between 25 and 50 grams of silver, while hybrid vehicles use 18 to 34 grams of silver. That’s compared to 15 to 28 grams of silver in a light internal combustion engine vehicle.
In early 2021, the Silver Institute projected that silver demand from the automotive sector would reach 90 million ounces by 2025. In its latest release, the association states that silver demand from the car industry will be driven by infrastructure investment, broader decarbonization efforts and the expansion of charging stations.
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.
Expected demand in 2022: 235 million ounces
Jewelry is often what laypeople think about when they consider silver demand. And for good reason — few materials are better suited for jewelry than silver. Lustrous but resilient, silver responds well to sculpting, requires minimal care and lasts a lifetime.
While silver and gold possess similar working qualities, the white metal enjoys greater reflectivity and can achieve the a brilliant polish. A vast amount of silver supply from mine production gets turned into a form of jewelry. In 2021, silver jewelry fabrication rebounded from the economic strains of COVID-19, increasing by a significant 21 percent over the previous year. In 2022, that substantial growth is expected to have continued with a 29 percent increase over 2021 levels, but the Silver Institute anticipates that overall demand for the sector will fall by 10 percent year-on-year in 2023.
3. Bullion coins and silver bars
Expected demand in 2022: 352 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 well. Silver was the main circulating currency until the 19th century, when it was phased out of regular coinage.
Even so, silver is still used in some circulating coins, especially in American, Australian, Canadian, Mexican and Austrian bullion coins for investors. Silver consumption in 2022 saw record high demand of 325 million ounces. The Silver Institute expects to see physical silver investment demand drop to 295 million ounces in 2023, which will still represent the third highest total on record for this important segment of the market.
Expected demand in 2022: 73 million ounces
Sterling silver has been the standard for silver holloware 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 2021 silver consumption from the silverware industry recovered from the hit it took from the global pandemic, rebounding by 32 percent from 2020 levels. Demand for the metal from the silverware industry is expected to have grown by a massive 72 percent in 2022.
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.
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