Eric Sprott, Billionaire Investor
Around 60 per cent of the total demand for silver comes from industry. Industrial demand has increased considerably in recent years. “Silver’s usage in greentech is propelling its industrial demand, especially from the solar and electric vehicle (EV) sectors. It also finds usage in high-end electronics and 5G technology,” says Vikram Dhawan, head-commodities and fund manager, Nippon India Mutual Fund.
“Investing in silver now can capitalise on these unique advantages, positioning investors to benefit from both immediate industrial demand and long-term economic stability”
– Vikhram Dhawan from Mutual Fund
1,240M annual consumption
820M annual mine production
82% of annual silver supply sourced from mining
18% of annual silver supply sourced from recycling
7.8% since 2003 low vs. US average annual CPI 2.5%
7:1 silver: gold mine supply ratio
86:1 silver: gold price ratio (Long term average 60:1)
Quote: Navneet Damani, group senior vice-president, head of commodities research, Motilal Oswal Financial Services.
“While demand has surged, supply has failed to keep pace. Mining production has been affected by labour shortages and environmental regulations, leading to tighter supplies.”
Silver demand for solar installations has grown, representing 140 Moz or 11% of total demand.
“Robust Greentech demand is driving the industrial use of silver, with around 60% of total demand coming from industry. Industrial demand has surged in recent years, especially in the solar and electric vehicle (EV) sectors, high-end electronics, and 5G technology,”.
“2024 has been a remarkable year for silver, with over a 30% price increase year to date, and experts predict further surges. Silver’s bull run is expected to continue due to compelling fundamentals. Silver’s fortunes in the medium to long term will be tied to the development of the greentech space,”
“The biggest positive for silver is climate change. Rising temperatures lead to a cycle of hotter summers and rising energy demand, resulting in higher greenhouse gas emissions. Solar energy is likely to be a massive part of the fight against climate change. Even by conservative estimates, the solar industry is forecast to grow over 30% in the next decade.”
– Vikram Dhawan, Head of Commodities and Fund Manager at Nippon India Mutual Fund.
Dhawan expects the price of silver to reach 2,250 per kilogram (up from the current 1,648.99 per kilogram) in the next 12-15 months, driven by supply-side constraints. “Silver is mainly mined as a by-product of zinc, lead, and a few other metals. Currently, the production cycle of these metals is not robust. The availability of scrap and concentrates is also low, which may prevent the market from returning to equilibrium before 12-15 months,” he concludes.
Global demand for silver has risen by 18% last year to a record high of 1.24 billion ounces, creating a huge supply deficit’, the Silver Institute said in April 2023, predicting more shortages in the years to come.
The silver market was undersupplied by 237.7 million ounces in 2022’, the institute said in its latest World Silver Survey, calling this “possibly the most significant deficit on record”.
They also stated that 2022’s undersupply and a 51.1 million ounce shortfall in 2021 had wiped out cumulative surpluses from the previous decade and predicted further undersupply of 142.1 million ounces this year.
All-in Sustaining Cost (AISC) =
Of Producing 1 oz of Silver
| YEAR | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Million ounces | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024F | 2023 | 2024F |
Supply | ||||||||||||
| Mine Production | 896.8 | 899.8 | 863.6 | 850.6 | 837.2 | 783.4 | 829.0 | 836.7 | 830.5 | 823.5 | -1% | -1% |
| Recycling | 147.0 | 145.7 | 147.2 | 148.7 | 148.2 | 164.3 | 173.7 | 176.9 | 178.6 | 178.9 | 178.9 | 1% |
| Net Hedging Supply | 2.2 | 0.0 | 0.0 | 0.0 | 13.9 | 8.5 | 0.0 | 0.0 | 0.0 | 0.0 | na | na |
| Net Official Sector Sales | 1.1 | 1.1 | 1.0 | 1.2 | 1.0 | 1.2 | 1.5 | 1.7 | 1.6 | 1.5 | -6% | -9% |
| Total Supply | 1,047.0 | 1,046.5 | 1,011.8 | 1,000.5 | 1,000.3 | 957.4 | 1,004.3 | 1,015.4 | 1,010.7 | 1,003.8 | -0.5% | -1% |
| Demand | ||||||||||||
| Industrial (total) | 457.1 | 489.5 | 526.4 | 524.2 | 523.5 | 509.7 | 561.3 | 588.3 | 654.4 | 710.9 | 11% | 9% |
| Electrical & Electronics | 272.3 | 308.9 | 339.7 | 331.0 | 327.3 | 322.0 | 351.2 | 371.3 | 445.1 | 485.6 | 20% | 9% |
| … of which photovoltaics | 59.6 | 81.6 | 99.3 | 87.0 | 74.9 | 82.8 | 88.9 | 118.1 | 193.5 | 232.0 | 64% | 20% |
| Brazing Alloys & Soldiers | 51.1 | 49.1 | 50.9 | 52.0 | 52.4 | 47.5 | 50.5 | 49.2 | 50.2 | 51.8 | 2% | 3% |
| Other Industrial | 133.7 | 131.5 | 135.8 | 141.2 | 143.8 | 140.2 | 159.6 | 167.8 | 159.0 | 173.5 | -5% | 9% |
| Photography | 38.2 | 34.7 | 32.4 | 31.4 | 30.7 | 26.9 | 27.7 | 27.5 | 27.0 | 26.1 | -2% | -3% |
| Jewelry | 202.5 | 189.1 | 196.2 | 203.2 | 201.6 | 150.9 | 182.0 | 234.5 | 203.1 | 211.3 | -13% | 4% |
| Silverware | 58.3 | 53.5 | 59.4 | 67.1 | 61.3 | 31.2 | 40.7 | 73.5 | 55.2 | 58.8 | -24% | 7% |
| Net Physical Investment | 309.3 | 212.9 | 155.8 | 165.9 | 187.4 | 208.1 | 284.3 | 337.1 | 243.1 | 212.0 | -28% | -13% |
| Net Hedging Demand | 0.0 | 12.0 | 1.1 | 7.4 | 0.0 | 0.0 | 3.5 | 17.9 | 12.2 | 0.0 | -32% | na |
| Total Demand | 1,065.4 | 991.8 | 971.3 | 999.2 | 1,004.4 | 926.8 | 1,099.6 | 1,278.9 | 1,195.0 | 1,219.1 | -7% | 2% |
| Market Balance | -18.4 | 54.7 | 40.5 | 1.3 | -4.1 | 30.6 | -95.4 | -263.5 | -184.3 | -215.3 | -30% | 17% |
| Net Investment in ETPs | -17.1 | 53.9 | 7.2 | -21.4 | 83.3 | 331.1 | 64.9 | -125.8 | -42.1 | 50.0 | -67% | na |
| Market Balance less ETPs | -1.3 | 0.8 | 33.3 | 22.7 | -87.4 | -300.5 | -160.3 | -137.7 | -142.2 | -265.3 | 3% | 87% |
| Silver Price (US$/oz, London price) | 15.68 | 17.14 | 17.05 | 15.71 | 16.21 | 20.55 | 25.14 | 21.73 | 23.35 | - | 7% | na |
| Source: Metals Focus |
The supply and demand cycle for metals, including silver, works like any other market: when demand is higher than supply, prices tend to rise. In the case of silver, the market has been in a shortage for four years, with more silver being used in industries like electronics and renewable energy than is being produced by mines. As a result, the limited amount of available silver is becoming more valuable, which is pushing up prices. If mining companies can’t increase production to meet the growing demand, we could see silver prices rise even further.
“The silver market is experiencing its fourth consecutive year of structural deficit, driven primarily by increasing industrial demand. This deficit is expected to persist and so notably deplete above-ground stocks. A critical question now facing the market is whether mine supply can respond to restore balance.”
-The Silver Institute
