Key Applications Devour Silver
Solar Panels
The Silver Institute’s Outlook for New Electrical &
Electronic Uses of Silver (released July 2014) reports
4% year-over-year growth in overall industrial demand
for silver in 2013. Modest, but what isn’t apparent in
the headline numbers is that most of that growth came
in the second half of the year.
And the recovery was driven in large part by a resurgence
in solar panel manufacturing. The solar industry wound
up with significant overcapacity, and underwent about 18
months of retrenching as demand caught up.
The surge in silver prices to nearly $50/ounce in 2011
also prompted significant “thrifting.” Manufacturers
found ways to do more using less silver – a tough
dynamic for short-term demand but likely good for
demand longer term, because manufacturers now have
less incentive to find alternatives.
Imports of silver powder, particularly in China, for use
in new panels are once again on the rise.
The market research firm IHS forecasts 22% growth
in solar this year versus 2013. Much of this growth
is expected in China and Japan where governments
recently shifted policy even more in favor of
solar power. But significant growth is expected
virtually everywhere as manufacturing costs fall and
efficiency rises.
The chart below, showing solar installations and
average cost in the U.S., provides a good idea of what
is happening globally.
Silver demand in photovoltaic panels represented
approximately 40 million ounces in 2013. Investors can
expect rapid growth in that number in the coming years.
Flexible Displays
New consumer electronics, including smart watches
and wearable medical sensors are just now coming
to market, and silver has an important role to play.
Currently most touch screens use indium tin oxide as
a conductive transparent layer. However, the layer is
brittle and fragile. More flexible and resilient silver
nanowire appears set to gain widespread use as an
alternative. Demand for silver in this brand new
application is forecast for a modest 500,000 ounces by
2017, but growth beyond that may prove exponential.
LED Lighting
TVs and computer displays already feature LED
technology, but light emitting diodes are also
transforming the way consumers light their homes
and businesses. Anyone visiting their local home-
improvement center will encounter an aisle of the
new LED light bulbs featuring dramatically longer
life and much greater efficiency. In 2013, LED
bulbs represented 20% of demand and as prices fall,
adoption of the new technology will accelerate.
Silver has three applications in LED: a reflective layer, an
adhesive layer, and a bonding wire. Cumulatively, demand
for these applications is expected to reach 8 million ounces
over the next 5 years. And once again, growth in demand
beyond that is expected to be enormous.
Ethylene Oxides & Formaldehyde
Ethylene oxide is a key component in the production
of detergents, solvents, plastics, and other organic
chemicals. Roughly 25% of the ethylene oxide
produced is used to make antifreeze coolant for
vehicles. The production of polyester and other
common plastics also requires these compounds.
Silver enters the equation, not as a component, but
as a catalyst to facilitate necessary chemical reactions.
Current annual demand in these applications is
roughly 150 million ounces according to the Silver
Institute. Thomson Reuters GFMS expects this
demand to increase by 8 million ounces in 2014.
Silver’s Positive Outlook
The Silver Institute in their Outlook for New
Electronic and Electrical Uses of Silver estimates
demand growth in these applications will be 6%
for 2014 with similar growth for the next two
years. That represents approximately 14 million
ounces of additional demand annually. Growth in
other industrial applications – including ethylene
oxides – should add nearly as many additional
ounces. Overall growth in industrial demand
looks set to significantly outpace GDP growth.
Silver is clearly good for a lot more than
hedging against inflation. And focusing
entirely on silver’s role as a monetary metal
means overlooking half of the complete
picture. Precious metals investors should also
factor in silver’s utility in a growing number of
manufacturing applications.
The efficiency of solar technology has been rising rapidly, making
this silver-consuming field more economically viable.
