Demand Is Strong, But Supply Isn’t: This Trend’s Got A Silver Lining

Demand Is Strong, But Supply Isn’t: This Trend’s Got A Silver Lining
Reda Farran, CFA

5 months ago2 mins

Demand for silver is rising a lot faster than its supply – a trend that’s mostly driven by the metal’s use in the manufacturing of solar panels. See, silver's superior electrical conductivity makes it essential in solar cell technology. What’s more, the solar industry’s newest, most efficient models use a lot more of the metal. So with a big worldwide push toward renewable energy sources and a rapidly expanding solar industry, particularly in China, the need for silver has never shined brighter. Solar is forecast to make up 14% of total silver consumption this year, up from 5% in 2014.

But this surge in demand is running into a supply challenge. The primary source of silver isn't underground: it’s a byproduct of mining for other metals like lead, zinc, copper, and gold. With the relative scarcity of primary silver mines and the mining companies’ general reluctance to invest in big new projects (especially since silver’s profit margins are lower than other metals), we’re not likely to see a big ramp-up in silver production to meet the growing demand. Supply was flat last year even as demand rose by nearly a fifth. This year, production is forecast to increase by a paltry 2% while industrial consumption – the biggest demand driver for the metal – is set to climb by twice that.

The strain on supply is so significant that a study from the University of New South Wales forecasts the solar sector could exhaust between 85% and 98% of global silver reserves by 2050. If the current trends continue and no significant breakthroughs are made in silver production, the price of silver is expected to rise. This would impact solar energy and other industries that rely heavily on silver, including electronics, jewelry, and photography. To bet on a climb in silver’s price, you could consider buying the iShares Silver Trust (ticker: SLV; expense ratio: 0.50%).



All the daily investing news and insights you need in one subscription.

Learn More

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG