Here are the key findings of his 10-page report:
- The silver market is currently facing multiple years of continued supply deficits, strong industrial demand growth, and inelastic supply, which could lead to a strong upward correction in the silver price over the coming years.
- Silver's growing application in energy transition and the automation of the automotive industry as it shifts to EVs will enhance silver's strategic role in the global economy going forward.
- The silver market is finely balanced until 2027 when it starts moving into large deficits again as supply tapers off and industrial demand continues to grow.
- Silver is an essential component in many industries, including electrical switches, solar panels, chemical-producing catalysts, and nearly every electronic device.
- Investment demand, particularly in the form of ETPs, could play a major role in the price direction of silver in the coming months and years.
Silver metal has played an essential role in many industries, including electrical switches, solar panels, and chemical-producing catalysts.
Its unique properties make it almost irreplaceable and have a wide range of applications.
Nearly every computer, mobile phone, automobile, and appliance contains the precious metal, making it a valuable metal in the manufacturing industry.
It is also the perfect substance for coating electrical contacts, like those in printed circuit boards, because of its high electrical conductivity and durability. It provides an electrical pathway when painting silver ink on any non-metal surface, eliminating the need for wires.
RIFID requirement
For instance, radio frequency identification device (RFID) chips are replacing barcodes on many items in supermarkets and supply chain inventories, and the chips' paper-thin antennas consist of sprayed-on silver.
One of the most important areas of growth for silver demand is its use in photovoltaics, with photovoltaic power as the leading current source of green electricity, the Lequime report found.
The PV market proved its resilience in 2020, despite Covid disruption, with newly added solar capacity growing, and the total estimated to have surpassed 130GW for the first time in 2021.
Silver's use in photovoltaics increased by 13% to 113.7 Moz in 2021 and 12% to 127.0 Moz in 2022 as global solar installations surged.
Silver Institute
According to the Silver Institute, PV installations are expected to increase by 80-100% over the next 4-5 years, with annual silver demand for photovoltaics reaching 200Moz by 2026, almost 20% of current demand.
Installations of solar panels increased by 300% between 2013 and 2021, while efficiencies in reducing loadings decreased by 45%, resulting in a net increase of 125% in silver demand, it added.
The silver market faces large deficits in the years ahead, according to Lequime.
Assuming no net buying or selling of exchange-traded products (ETPs), the market is finely balanced until 2027 when it starts moving into significant deficits again as supply tapers off and industrial demand continues growing.
PV installations set to rapidly increase
The silver Institute estimates that PV installations will increase by 80-100% over the next 4-5 years, leading to a considerable rise in silver demand from 2023.
Although the Silver Institute is not as aggressive in its outlook for growth in demand in the automotive industry, it still projects that nearly 90 million ounces of silver will be absorbed annually in the automotive industry by 2025, a growth of 50% over 2021.
Our motor vehicles are becoming more computerised as vast technological advances are incorporated into modern vehicles, and silver plays a vital role in their operation, Lequime said in his report.
For example, every electrical connection in a modern car is activated with silver-coated contacts, and starting the engine, opening power windows, adjusting power seats, he added.