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Those Old Films Contain Something Of Value?
At the turn of the 19th to the 20th century, photography was taking the world by storm not much unlike the success of cell phones today. Imagery and the process of developing photographs, films and books required vast amounts of the precious metal, silver. It created a new industry that thrived for a hundred years until the advent of digital technology which caught even the mighty Kodak off guard. With home printers and digital cameras from competitors upending the photography landscape, Kodak was late to the gate in developing its own digital cameras and printers, leading to its eventual bankruptcy. Fortunately Kodak still exists today but in much smaller form after restructuring. The same could be said for the old industry as a whole. It took a beating but surprisingly, after more than 20 years of mingling with digital, the photographic industry is thriving but at a much reduced scale.
50 years ago, the photographic industry ate up some 40% of all the silver used in industry, using the gelatin-silver manufacturing process. In the year 2000, just as we entered the new digital age, the industry gobbled up a massive 218 million ounces. By 2020, that number had dwindled to 'just' 30 million ounces. Still, according to the Silver Institute, the year 2022 saw a 3% gain over the previous year.
You'd think that with 800 to 900 million ounces of silver produced on average every year for the last 10 years or so that there would be this incredible surplus of silver now that the once primary consumer of silver was so diminished. Yet, according to Sprott Asset Management, 2023 will see a deficit of approximately 142 million ounces. Last year's silver deficit was a whopping 194 million ounces, 4 times that seen the year before.
So where is all the silver going? Solar panels... Lots and lots of solar panels.
The New (And Improved) Photovoltaic Industry
Improvements in solar cell technology have seen the use of silver drop from about 18.5 milligrams a few years ago to just 10 milligrams per watt today. On average, a new 100 watt solar panel uses about 0.67 ounces of silver. The 'green' movement and environmental concerns has resulted in a boom for solar panel manufacturers.
The improvements to photovoltaics in producing electricity just in the last few years is such that its costs can finally be comparable to the costs of other forms of electricity production. The cost of solar powered electricity are about half that of natural gas, two thirds of coal and equal to wind power (see: China Caused Gold Price Spike But Look At What Is Boosting Silver - KingWorldNews).
The solar panel industry now consumers 14% of total silver demand. Compare that to just 5% only 9 years ago. It is estimated that by 2030, the solar panel industry will be consuming 273 million ounces of silver. This would amount to about one-fifth of total demand and an increase of roughly 170%. So while the photographic industry's silver usage declined, the new solar panel industry is making up for the difference. Silver is used in solar panels because of its excellent conductivity, thermal efficiency and reflectivity.
The Emerging 5G Technology
A major upgrade is underway for cell phone usage which is called 5G to improve download speeds, bring improvements to 'The Internet of Things' and play a part in 'autonomous driving'. As of 2020, 5G's silver demand stood at 7.5 million ounces. This number is expected to grow to about 23 million ounces by 2030. Just as solar's silver demand is expected to rise by about 170% by 2030, 5G's silver demand is set to rise by about 206% over the same period (Learn more about 5G here).
Our smart phones each use a tiny amount of silver. According to EarthLink.net, recycling 1 million cell phones would result in the recover of 35,000 pounds of copper, 772 pounds of silver and 75 pounds of gold. Other 'smart' devices such as TVs (and even refrigerators) are also using silver.
As aforementioned, autonomous driving technology is playing a key part in the 5G revolution and of course, the vehicles used will be electric.
Electric Vehicles Need Critical Metals
One ounce of silver contains 28.34952 grams. Each new electric vehicle contains between 25 to 50 grams. In fact, the automotive industry as a whole consumes some 55 million ounces annually. This number is expected to grow to 90 million ounces in just 2 years. Silver is critical in electric vehicle battery production as well as in circuit boards, electric power steering and automatic braking.
According to Yahoo Finance, almost twice as many EVs were sold in 2022 compared to 2021 with a total of 6.75 million EVs sold worldwide. They also happen to mention the lack of new silver discoveries almost guarantees a supply squeeze in the near future. With a projected deficit of 142 million ounces this year and the massive deficit we saw last year, a supply squeeze is baked in the cake.
Silver's Other Uses
Because of silver's excellent anti-microbial, anti-fungal, anti-viral properties, it is used extensively in the health care industry. Silver jewelry alone accounted for 235 million ounces in 2022 while silverware gobbled up some 73 million ounces. Investment demand accounted for 329 million ounces, an 18% jump y/o/y while total industrial demand for silver grew to about 539 million ounces.
While most homeowners aren't aware of it, the circuit breaker panels installed in their homes contain a small amount of silver. Each circuit breaker in the panel contains about 1 gram of silver. This is just one of countless examples of how silver is utilized in industry and as such, without silver in our lives, things would be very different.
Is A Silver Short Squeeze Imminent?
There's a lot of talk that a silver short squeeze is imminent. I don't have a crystal ball about when or if this will happen but when crunching the numbers, it becomes apparent that 'something's got to give'. Most of the silver mined these days comes as a by-product of copper, zinc and gold mining. There are precious few primary silver mines in the world.
In the last few years, silver production has been declining and is expected to continue to decline. All the while, demand has exploded and projections are demand will continue to grow. The total deficit of the last three years amount to about 380 million ounces. So how can the deficit be offset?
There's a lot of investment silver out there and it's quite possible that higher prices might sway HODLs to divest some or all of their silver holdings. Some holding silver might chose to divest in exchange for cryptos or property.
Net physical investment rose to a new high of 332.9 million ounces in 2022, the fifth year of consecutive growth. It's safe to say that at least 1.2 billion ounces of silver are held in private hands. If silver rises in price from its present lows to new highs, we may see some of that silver unload in a great divestiture to the tune of hundreds of millions of ounces, setting the stage for a possible 'great wealth transfer'.
2022 was a stellar year for silver demand, breaking all previous records with a total 1.24 billion ounces. Expect similar results for 2023.
Peace and love to everyone!
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