Below are data gathered from the World Silver Survey. Specifically, from the GFMS’s 2010 Silver summary report (done in beginning of 2010 and covers 2009 findings).
Demand
In 2009, the uses for silver are as such:
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- Industrial – 41%
- Jewelery and silverware – 24%
- Investment – 14%
- Coins – 9%
- Photography – 9%
- De-hedging – 3%
Industry (trend = down)
Silver is the best electrical and thermal conductor of all metals and so is used in many electrical applications, particularly in conductors, switches, contacts and fuses. Contacts provide junctions between two conductors that can be separated and through which current can flow, and account for the largest proportion of electrical demand. The most significant uses of silver in electronics are in the preparation of thick-film pastes, in multi-layer ceramic capacitors, in the manufacture of membrane switches, silvered film in electrically heated automobile windshields and in conductive adhesives. Silver used in the fabrication of photo voltaic cells is seen as an area of rapid growth in the short to medium term. Other industrial uses for silver include as a coating material for compact disks and digital video disks, mirrors, glass coatings and cellophane and batteries. As silver prices rise, cheaper substitutes may be used if applicable.
Jewelery and silverware (trend = down)
Silver possesses working qualities similar to gold, enjoys greater reflectivity and can achieve the most brilliant polish of any metal. Consequently, the silversmith’s objective has always been to enhance the play of light on silver’s already bright surface. Pure silver (999 fineness) does not tarnish easily but to make it durable for jewelry, it is often alloyed with small quantities of copper. It is also widely used with base metals in gold alloys. Sterling silver, at a fineness of 925, has been the standard of silverware since the 14th century, particularly in the manufacture of “hollow-ware” and “flatware”. Plated silverware usually has a coating of 20-30 microns, while jewelry plating is 3-5 microns.
Coins (trend = up)
Historically, silver was more widely used in coinage than gold, being in greater supply and of less value, thus being practical for everyday payments. Most nations were on a silver standard until the late 19th century with silver coin forming the main circulating currency. But after the gold rushes, the silver standard increasingly gave way to gold. Silver was gradually phased out of regular coinage. Today, Mexico is the only country currently using silver, albeit in small amounts, in its circulating coins. Commemorative silver coins are bought by collectors as well as investors.
Photography (trend = down)
The photographic process is based on the presence of light sensitive silver halide crystals, prepared by mixing a solution of soluble silver, usually silver nitrate, with a soluble alkali metal halide such as sodium chloride or potassium bromide. These grains are then suspended in the unexposed film. The effect of light on the silver halide disturbs the structure of this compound, rendering it selectively reducible to metallic silver by reducing agents called developers. The resulting negative image is converted to the positive by repeating the process under specific conditions. Photographic film is used in radiography, the graphic arts and in consumer photography. Photographic film manufacturers demand very high purity silver. However, with the proliferation of digital imaging, the use of photographic films has reduced, and is expected to reduce further.
Other demands (trend = up)
The other elements of demand (government purchases, producer de-hedging and investment) are alike in that, on a net basis, they may not feature every year on the demand side.The official sector, for example, has not generated net purchases since 1997. Investment in Silver ETFs and physical silver were the main drivers of recent years’ rally.
Supply
In 2009, the world silver supply breakdown is as such:
- Mine production – 80%
- Scrap metals – 19%
- Government sales – 1%
Mine production (trend = up)
Geographically, just over half of mined silver comes from the Americas. Indeed six of the ten largest producing countries are in this region including the two biggest, Peru and Mexico. Of greater market relevance however, is the type of mine that silver comes from – most silver emerges as a by-product of the mining of other metals. A substantial portion of silver production comes from lead/zinc operations. Only around 30% of output comes from so-called primary silver mines, where silver is the main source of revenue. This is noteworthy given that the impact of the price of silver is most acute on primary silver production, whereas by-product silver production is in large part a function of the price of the other metals, with which silver is mined.
Scrap (trend = up)
Scrap, or more properly “old scrap,” is the silver that returns to the market when recovered from manufactured goods. This could include old jewelry, photographic chemicals, even discarded computers. However, it excludes silver that is returned untransformed by the manufacturing process or that never becomes an end product – so called “process scrap”. Old scrap normally makes up around a fifth of total supply.
Government sales and divestment
Disinvestment and government sales are similar in that both comprise the return to the market of old bars and coins by the private sector and governments. It is worth bearing in mind that these sources may not add to supply every year on a net basis. In some years, individuals have been net investors (as was the case in 2008) and governments net buyers. The final, though normally minor, component of supply is producer hedging or the early sale by mining companies of future production. Hedging may also not appear every year on the supply side on a net basis as it can form part of demand as de-hedging (as occurred last year).
Below is the overview of supply and demand over the years:
Click here for the 2010 Silver summary report.
