Silver Scrap Supply Sees Further Growth

By Michelle Smith — Exclusive to Silver Investing News

Silver Scrap Supply Sees Further Growth

High metal prices have not only encouraged an increase in silver mining, but have also prompted growth in silver recycling. Supply from scrap rose for the second consecutive year in 2011, according to data from the Thomson Reuters GFMS World Silver Survey 2012. With silver from scrap rising some 20 million ounces, this source of supply accounted for nearly 25 percent of total production last year.

Part of the increase in scrap silver can be attributed to individuals. Philip Klapwijk, Head of Global Analytics at GFMS, noted an increase in buy silver campaigns analogous to the buy gold campaigns that encouraged the public to cash in on items such as old jewelry and silverware.

While such transactions have been quite common in Asian nations, of late there has been a notable increase in OECD countries. Jim Steel, Chief Commodities Analyst at HSBC, pointed not only to encouraging prices but also to the bad economy as drivers of this increase.

In addition to the recycling of personal possessions, some people have become silver hunters of sorts, scouring second hand shops, estate sales, and online auctions for items such as silverware, platters, and old jewelry that can be sold for their metal value.

Industrial scrap

Then, there is the silver that is recovered from products. At one time, waste from photographic applications was a major contributor to the scrap silver supply stream. However, with the decline of film photography this source is becoming less significant. But, there are numerous other silver-containing products that can be recycled, such as spent catalysts, dental alloys, and electronics. Since silver is an excellent conductor of electricity, there are scores of items that use the metal, including cell phones and laptops.

For the consumer, efforts to recycle these items for their content of silver and other precious metals is hardly worthwhile since they contain only small amounts of metal. Opportunity may knock, however, for those who can get their hands on mass quantities of these goods.

Silver scrap and business

Boliden (TSX:BLS) is one company that sees treasure in electronic trash. The company owns mines and smelters in Europe and claims to be the world’s leader in this area of recycling.

The company produces 500,000 kilos of silver annually, and approximately 25 percent of silver from its Rönnskär smelter reportedly comes from recycling electronic scrap.

According to Boliden, the combination of shorter product lifecycles and stricter legislation is making electronic scrap the fastest growing recycling segment. And the company is banking on that projection.

Boliden expects its e-scrap expansion project, estimated to cost 1.3 billion SEK (approximately $193.2 million), to triple the company’s recycling capacity beginning this year.

Extracting metals from scrap only requires ten to fifteen percent of the energy required to extract metals from ore, and hence is good for both Rönnskär’s profitability and the environment, the company says.

While silver recycling may provide a cash stream for some companies, all are not in it for the money per se. In many jurisdictions, old silver-containing products are considered hazardous waste, and that makes their disposal subject to regulation. To help ensure compliance, a company may turn to a service provider such as Xstrata Recycling, to which they can pass the responsibility of disposing waste. Xstrata Recycling then pays the client a percentage of the recovered metal value if it exceeds the associated charges.

Scrap silver recycling is much the same as silver mining in that companies engaged in the work are often seeking other metals too. About one kilo of silver can be recovered from one ton of old mobile phones, according to Boliden. But phones and other electronics contain other valuable items such as gold, platinum, and copper.

For miners, continued increases of scrap silver may not be the best news since they could put a damper on prices by widening the gap between supply and demand. According to GFMS, fabrication demand fell in 2011. The silver market was in surplus and would have been overwhelmingly flooded with metal if there hadn’t been strong support from investors.

In 2012, GFMS forecasts that supply from scrap will remain strong, but doesn’t foresee significant growth. There will likely be a further rise in jewelry and silverware recycling, but given the decline in photographic demand for silver, which has resulted in a decline in associated silver recycling, scrap as a source supply is expected to remain flat.

 

Securities Disclosure: I, Michelle Smith, have no equity interests in the companies mentioned in this article.

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