In a recent report, ABC Bullion highlighted that global silver production has decreased in recent years, while industrial demand for the metal has been on the rise. This provides reasons for optimism about silver prices in the coming years.

This includes traditional areas of the market like silverware, photography, and jewellery. Industrial demand is also surging, with this segment of the market seeing total demand increase by 56% between 2015 and 2024.

Overall production of silver is declining

Since peaking in 2016, global silver production has declined by 8%, with annual output falling from almost 900 million ounces (28,000 tonnes) to 831 million ounces by the end of 2023, with production set to fall in 2024 as well.

Silver production is unlikely to meaningfully increase in the near future, especially given it is often a byproduct of other mines, which are typically focused on base metals, with less than 30% of total silver production coming from what are classified as ‘primary’ silver mines, which are defined as mines where revenue from silver drives the overall economic viability of a mine. This has positive implications price wise, especially when one considers the rising demand we have seen in recent years.

Silver market has been in deficit for years

Like any market, the law of supply and demand also applies to silver. The chart below shows that the annual surplus or deficit in the silver market, with data dating back to 2015. When the market is in surplus, it means supply outstrips demand. But when it is in deficit, as it is today, and indeed has been since 2019, it means total demand is outstripping total supply.

Since going into deficit in 2019, the silver price has almost doubled. Given current demand figures, mine production and/or silver recycling would have to increase by more than 20% to close this deficit. That is unlikely to happen any time soon.

Industrial usage of silver – led by photovoltaic demand – is soaring

Silver is used in a vast range of industries today. It plays a key role in medicine, helps your car run, purifies water, acts as a catalyst, and is used in brazing and soldering. There is also still approximately 280 million ounces (nearly 9,000 tonnes) of silver used in photography, silverware and jewellery manufacturing each year.

But nowhere has silver become more important than it has in the photovoltaic industry, with demand from this segment of the market increasing from just over 50 million ounces of silver a year in 2015 to 194 million ounces by the end of 2023

This is due to growing focus on solar energy, with The Silver Institute suggesting about 440 GW of solar energy was installed in 2023. Given silver is a key component in a photovoltaic cell, it is no surprise this is one of the fastest growing uses of silver, with forecasts suggesting photovoltaic demand will catapult higher again in 2024, on track to hit 232 million ounces. That is a near 300% increase on where it was 9 years ago.

This surge has been the primary driver of the more than 210 million ounce increase in industrial demand for silver since 2015, with photovoltaics now accounting for 48% of total industrial demand, up from just 22% nine years ago. This can be seen in the chart opposite. The fact that demand from this part of the market is unlikely to subside anytime soon is yet another reason to be optimistic about the price outlook for silver in the years ahead.

ABC Bullion