5 Factors That Drive Silver Demand

Investors should watch out for these five factors that impact silver demand.

Silver demand

Known as the world’s most versatile metal for its unique properties, silver is used in many applications, from everyday silverware to medicine. Industrial and technological use of silver accounts for well over half annual demand, due to the metal’s strength, malleability and ductility.

In 2016, global physical demand for silver was projected to decrease in most sectors, including electrical and electronics, brazing solders and alloys, and photography, according to the USGS. But an increased demand will come from the solar industry, since the precious metal is a great conductor of both heat and electricity making it a perfect conductor for solar panels.

Here’s a look at five factors that investors should keep an eye on that are driving silver demand, according to the most recent data from the Silver Institute.

1. Industrial Applications

Silver is the best electrical and thermal conductor of all metals and so is used in many electrical
applications, particularly in conductors, switches, contacts and fuses.

The most significant uses of silver in electronics are in the preparation of thick-film pastes,
in multi-layer ceramic capacitors, in the manufacture of membrane switches, silvered film in electrically heated automobile windshields and in conductive adhesives.

In 2015, demand from industrial applications saw a 4 percent decline from the previous year, reaching 588.7 Moz, its lowest level since 2009. Among many other industrial applications, photovoltaics, or solar panels, the automotive industry and brazing and soldering are the main applications increasing silver demand.

Solar Panels

Silver used in the fabrication of photovoltaic cells, more commonly known as solar panels, is seen as an area of rapid growth in the short to medium term. The GTM Research and the Solar Energy Industries Association expect photovoltaic installation to triple between 2015-2020.

Using silver as conductive ink, photovoltaic cells transform sunlight into electricity. In 2015, photovoltaic demand for silver was up significantly by 23 percent, compared to the previous year at 77.6 Moz. China was the main country driving this increased demand.

Automotive Industry

Over 36 million ounces of silver are used annually in automobiles, as 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 joint when combining metal parts. In addition, silver brazing alloys are used widely in everything from air-conditioning and refrigeration to electric power distribution.

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2. Jewelry

When it comes to jewelry, few materials are better suited for it than silver. Lustrous but resilient, it responds well to sculpting, requires minimal care and lasts for a lifetime.

Silver possesses working qualities similar to gold, enjoys greater reflectivity and can achieve the most brilliant polish of any metal. In 2015, jewelry fabrication increased for the third consecutive year to hit a fresh record high of 292.3 Moz.

3. Silverware

Sterling silver has been the standard for silver hollowware and silver flatware since the 14th century. When you buy silver cutlery or other silver décor, it will last for generations to come, as it resists tarnish and is a traditional decoration in homes around the world. Copper is mixed with silver to strengthen it for use as cutlery, bowls and decorative items. In 2015, demand from silverware was slightly up from 60.7 Moz to reach 62.9 Moz.

4. Photography

Photography used to be the main end-use of silver, reaching its peak in 1999 when it represented 25 percent of total fabrication. Because the popularity of digital photography has all but replaced film photography among mainstream consumers, the use of silver-based imaging has been steadily dropping for almost a decade.

Within five years, photographic demand slipped below 20 percent of total demand, and dropped to 9 percent by 2013. In 2015, demand continued to fall by a further 4 percent compared to the previous year, reaching the lowest level at 46.7 Moz.

That said, silver is still essential for medical X-Ray technicians and those in the motion picture industry, which remain a big consumer of the precious metal.

5. Coins and Bars

Minted silver coins were first used in the eastern Mediterranean region in 550 B.C. and by 269 B.C, the Roman Empire 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 after the gold rushes.

Despite this, silver is still used in some circulating coins and especially in American, Australian, Canadian, Mexican and Austrian bullion coins for investors. Silver coin fabrication rebounded in 2015, rising by 24 percent, reaching the highest level in record, according to the Silver Institute, at 134.1 Moz.

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

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