The Conversation (0)
A new report commissioned by The Silver Institute, from research firm GFMS, titled “The Future of Silver Industrial Demand” forecasts the industrial demand for silver trough 2015.
By Michael Montgomery—Exclusive to Silver Investing News
The report looks into the expansion of established uses such as electrical connections, as well as new emerging demand from innovations such as nano-tech as the driver of future industrial demand. An example of expanding established markets is the use of silver in automotive electrical connectors. The growth in this market is not just from increasing automobile demand but also from the expansion of features such as navigation systems, and electric seats, which though previously found only in luxury vehicles are quickly becoming a standard on all vehicles in this technological age. The story is much the same for cell phones and other high tech electronics markets.
Photovoltaic solar panels (PV) have been growing in popularity over the last decade as costs of electrical production are coming close to grip parity, or the cost of producing an equivalent amount of energy from fossil fuels. Silver is used in ‘thick film’ solar panels in which crystalline silicon is used to covert solar heat to energy. The use of silver in these solar panels has grown from 3 Moz in 2004 to 50 Moz in 2010. The report forecasts the demand for silver in these types of solar panels to grow to double by 2015. However, the report also covers the growing use of ‘thin film’ or CIGS solar panels that do not use silver in the production. This new solar panel design could reduce the total amount of silver used in PV technology.
Silver’s use in a host of other electrical devices is also a factor in total demand growth. These applications range from superconductors, super-capacitors, solid state lighting, batteries and other applications. Silver’s role in burgeoning Nano technology will make electrical components smaller and more efficient, which should increase the level of consumption of the products.
The report also cites the growing use of silver as an anti-microbial agent in the medical community, water purification and wood preservation industries as having massive growth potential. Some of these applications come from the ethylene oxide industry which uses silver in the production of a wide array of applications from solvents and plastics, to disinfectants in the medical community. Currently there is over 100 plants globally, the report forecasts silver capacity at these plants to exceed 150 Moz.
The effect of the projected 36 percent growth of industrial fabrication on the supply and demand fundamentals at play in the silver market may be quite substantial. Many analysts have noted that the supply of silver will become increasingly tight as mines worldwide are not able to make up for growing demand. This will obviously raise the price of silver, which has already seen impressive gains since the economic downturn. Precious metals are increasingly sought after as a hedge against inflationary trends, and as the price of gold is becoming out of reach for the average investor, the increases in investment demand for the poor man’s gold is booming.
Unless a robust economic turnaround is realized in the short term, which would entice investors to seek out equities in greater volume, the counter inflationary investment trend does not seem to be letting up anytime soon. Coupled with increases in industrial demand, the price of silver has nowhere to go but up. Of course the higher price of silver may increase the search for alternatives to the white metal; however, because of silver’s unique properties very few substitutes exist. This means that direct investment in silver as well as investments in ETF’s should perform well going forward.