Silver is at the heart of the clean energy transition, essential for solar cells and electric vehicles (EVs) due to its unmatched conductivity. As demand from the photovoltaic industry surges, outpacing supply, silver’s pivotal role highlights both the opportunities and challenges in achieving a sustainable future.
Silver experts highlighted significant challenges in meeting global demand despite robust price signals favoring increased metal production amid the expanding energy transition. This metal plays a critical role in EVs and solar cells, with demand surpassing supply in recent years, leading to depleted inventories.
According to the Silver Institute, photovoltaics alone are projected to account for 19% of global silver demand in 2024, equivalent to 232 million ounces. This represents almost a 20% increase from 2023 and a substantial 96% surge from 2022 levels.
Anticipating a deficit of 215.3 million ounces in 2024, the Silver Institute forecasts that industrial applications will drive 58.3% of the world’s total demand of 1.2 billion ounces. However, global silver supply primarily results from byproduct production associated with other metals. Moreover, despite high prices, there’s limited incentive for new production.
Shining Spotlight on Silver
Adrian Day from Adrian Day Asset Management emphasized the severity of the silver deficit, attributing it to surging demand from sectors like solar panels and EVs, which have seen demand triple in 3 years. He noted that inventories are critically low with no substantial stockpiles available to mitigate the shortage.
Day further underscored that only about 30% of silver production comes from primary silver mines, with the majority being sourced as a byproduct. This setup means that the supply of newly mined silver does not respond proportionately to price fluctuations. As a result, this could lead to heightened price volatility.
Silver prices have surged significantly this year, prompting speculation about their potential peak in the remaining 6 months. A crucial element to monitor is the supply and demand dynamics, as silver demand consistently exceeds supply.
Historically, silver demand was evenly split between industrial use and investment. However, industrial demand has surged recently, now accounting for 64% of global silver demand, a 19% increase from the previous year.
The World Silver Survey reports that 2024 marks the 5th consecutive year of a silver shortage. In 2023, demand exceeded supply, resulting in a market deficit of over 142 million ounces. This shortfall is projected to nearly double to 265 million ounces by the end of 2024 due to rising industrial demand.
This upward trend is expected to continue, driven primarily by the Green Energy Transition, especially solar energy.
Photovoltaic Surge: Solar Energy’s Growing Appetite for Silver
A growing solar power industry is fueling up the surge in the demand for silver, essential for manufacturing photovoltaic (PV) panels. Due to its high electrical conductivity, thermal efficiency, and optical reflectivity, silver is integral to solar PV production. Consequently, mining companies are aiming to boost output as silver prices climb to decade highs.
Global investment in solar PV manufacturing more than doubled last year to around $80 billion, accounting for 40% of global investment in clean-technology manufacturing, according to the International Energy Agency (IEA). China significantly increased its investment in solar PV manufacturing between 2022 and 2023.
Global renewable capacity increased by 50% to nearly 510 gigawatts last year—the fastest growth rate in 3 decades. Three-quarters of this growth came from solar PV energy, as reported by the IEA.
Demand for silver from solar PV panel manufacturers, especially in China, is forecast to increase by almost 170% by 2030. The amount could reach about 273 million ounces, which would constitute about one-fifth of total silver demand, according to investment manager Sprott.
Coeur Mining is expanding to meet the rising silver demand, completing a significant expansion of a mine in Nevada, which will become the largest source of domestically produced silver in the U.S.
London-based Hochschild Mining is also expanding its silver operations, aiming to secure permits for a silver project in southern Peru later this year. Scheduled to start production in 2027, the project is expected to add 50 million ounces of silver annually.
Some experts noted that given the underlying industrial demand dynamics and existing supply constraints, the industry may be seeing the start of a silver bull market.
Silver’s New Gold Rush
The boom in demand has led to soaring silver prices, reaching $31.3/oz as of writing. This price surge has bolstered the share prices of silver miners.
However, rising silver prices might force solar PV panel manufacturers to increase their prices later this year.
Paul Wong, a market strategist at Sprott, predicts that silver could see a rise similar to gold, which hit eight straight sessions of record highs in April. Despite trailing gold’s popularity with central banks and sovereign institutions, silver maintains a strong correlation with gold. Wong expects substantial buying from the photovoltaic industry to drive further silver demand, noting that:
“Similar to how gold bullion has soared due to a new wave of major purchasers among central banks and sovereign entities, silver has and will likely see even more substantial buying from the photovoltaic industry.”
Discussing government influence on silver mining, industry leaders highlighted regulatory policies in major jurisdictions like Mexico. The South American nation can either stimulate or deter investment in silver projects due to lengthy permitting processes.
As silver demand continues to soar, driven by its critical role in solar power and the clean energy transition, the industry faces significant challenges in meeting global needs. Despite robust price signals and increased production efforts, the supply constraints highlight the urgency for innovative solutions and strategic investments to sustain this pivotal resource’s future.