Silver will become a precious industrial metal
Silver is an important precious metal of great antiquity, endowed with the characteristics of an industrial metal. In recent years, with the increase in industrial applications, the importance of silver stands has increased. The metal exhibits the highest electrical conductivity, thermal conductivity and reflectivity of all metals.
Admittedly, 2020 and 2021 have not been good years for the metal due to the slowdown in industrial production. Disrupted supply chains, raw material bottlenecks and significantly higher energy costs have had a negative impact on industrial production. Up to 50% of silver demand is due to industrial use. Photovoltaics is a key segment of industrial demand.
The industrial metal character of silver is expected to grow in popularity in the coming years. The metal is favored for its many physical and chemical properties useful in various industrial applications, including vehicle (EV) electrification, 5G mobile phone technology, and most importantly, the commitment of various governments to invest in “green” infrastructure. “.
Current low prices would encourage increased demand for jewelry and silverware in price-sensitive markets like India. The recovery in demand and its positive effect on prices would attract financial investors. It may also cause ETF investors to jump on the bandwagon, leading to capital inflows.
While the silver demand outlook for 2022 looks constructive, the best would come in the years to come.
Sustainability is the buzzword, after the United Nations unveiled the Sustainable Development Goals to be achieved by 2030. Recent political developments have improved the outlook for white metal over the next ten years.
As governments rush to decarbonize their economies, the world is rapidly moving towards renewable energy.
Green technologies are in; and money has an essential role in green technologies. Solar energy is considered an inexhaustible clean energy to replace fossil fuels. This has led to the rapid advance of solar capabilities around the world. In automobiles, electric vehicles (EVs) are replacing traditional internal combustion engine vehicles. In both of these cases, silver is used for its special and specific properties.
Applications in the automotive sector
The silver will benefit from applications in the automotive sector – for example, in electrical contacts, microprocessors, memory and printed circuit boards, radars and camera sensors. Silver is difficult to replace in various automotive applications due to its superior electrical properties. Many are essential for safety and meet stricter environmental standards.
Studies suggest that in battery-powered vehicles, the use of silver will be significantly higher than in conventional vehicles. This is in addition to use in charging stations, power generation and other supporting infrastructure that would need this metal.
The Silver Institute estimates that the automotive industry‘s demand for silver will reach 88 million ounces by the middle of this decade (up from just over 60 million ounces in 2021). In 2040, electric vehicles could even devour nearly half of the annual silver supply (currently, a good billion ounces).
The installation of solar systems also increases the demand for silver. The photovoltaic sector currently requires approximately 100 million ounces of silver per year. Some experts predict an increase in demand for silver to 185 million ounces over the next ten years from the photovoltaic industry.
Given this emerging scenario, silver should benefit the most among precious metals. Silver can not only outperform gold, but at some point it would decouple from gold and stand on its own.
The risk that the growth in silver supply does not follow the growth in demand is real. Thus, stakeholders should prepare for increasingly higher prices in the coming years.
The Indian government should take cognizance of the emerging scenario. Demand in the country is likely to grow rapidly with the political push on electric vehicles and solar power. As the dependence on imports of this metal is set to increase, there is a need to work towards increasing silver supplies from a long-term perspective.
(The author is a political commentator and commodity market specialist. Opinions are personal)
January 17, 2022