In today's Exponential Investor...- Silver: what can't you do with it?
- Some of the hard numbers
- Watch this space…
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Of all the metals and minerals in the world, it is silver that is the most special.
Call it what you want: poor man's gold, the money of gentleman or the "other" precious metal, it doesn't matter, silver is simply
irreplaceable.
You name it, silver can do it.
You can drink it, wear it or wrap yourself up in it. You use it to eat, absorb energy or send a message. No silver, no electronics. That's no light switches, no computers, no phones, solar panels or wires. Because of its antibiotic properties it is widely used in the medical industry.
Silver has superior thermal and electrical conductivity amongst the metals, and it can't be easily replaced. It's malleable and ductile. Which means that it can be rolled, hammered or pressed into flat sheets, or drawn into a thin wire without splintering or fracturing.
Silver was "money" long before gold. And even earned the position as the first "world money" when the 16th century Spanish peso began to circulate the globe. These simple Spanish coins opened up European trade with China.
Often silver ranks second to gold, yet in most aspects silver has no peer.
Anything gold can do; silver can do for a fraction of the cost.
And we can't move forward without it…
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The most precious metal
Of the billion or so troy ounces (toz) of silver refined each year, about 20% goes into jewellery. A smidgin less becomes physical bars and coins. A sprinkling goes to silverware and photography equipment. But the lion's share – some 524 million toz – is gobbled up by industrial use.
| Source: GFMS Definitive; Metals Focus; the Silver Institute; UBS; Sprott |
And it's the industrial uses of silver that are set to put pressure on supply.
Already photovoltaics consumes roughly 10% of all silver supply each year – and this is tipped to increase steadily.
Yet, the real source of demand for silver isn't coming from here: it's electrical vehicles (EVs) and the 5G mobile network.
Let's start with EVs. A car running on petrol or diesel – assuming you can afford to put these carbons in your car today – would have about 15 – 28 grams (g) of silver inside. A hybrid vehicle would sit at 18-35g, whereas an electric vehicle contains 25-50 grams of silver.
Granted, these aren't large amounts or differences. We are talking about barely even two troy ounces. But the smarter our cars get, the more silver they will require. As it stands, the auto sector consumes 61 million toz of silver: in three short years, it's expected to reach nearly 90 million toz.
It's a similar story with the rollout of the 5G network. The expansion and rollout of this network are going to drastically alter how we share and receive information.
This network upgrade will improve speeds, reduce signal drop… and increase the speed of signal transfer. The latter is key to moving autonomous vehicles from sci-fi to reality.
The 5G network is small fry when it comes to silver demand, needing only 7.5 million toz annually. As the rollout continues, its need for silver is set to double by 2025. Again, that will have fairly little impact on the overall market.
As with all new technologies, it's the demand you can't forecast that could blindside the market. The flow-on effects from a faster network will drive greater demand for better semiconductor chips, cabling and other electronic devices that move electronic signals. And silver is critical to the speeding up of the signal speed.
The next leap for mankind
Silver's total production figure for 2021 isn't in yet. However, forecaster have estimated production to be 1.056 billion toz, against total demand of 1.033 billion toz. Twenty or so million ounces isn't a large buffer, leaving the silver market vulnerable to a deficit.
Perhaps silver's true value isn't its wealth properties, rather its ability to propel us one step further into the future.
Silver was one of the first metals people discovered. And while it was used as money for several millennia, its superior electrical properties mean that it is and has been at the forefront of technological development.
The unanswered question
Today the silver market has some spare capacity, keeping a lid on the price. The one thing that might force the price higher, is if this small excess were to dry up. How could that happen? Join me next week, and I'll show you.
Until next time,
Shae Russell
Co-editor,
Exponential Investor
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