The forecast industrial demand for silver is looking positive according to research firm Metals Focus.

In the latest Precious Metals Weekly, analysts have forecast a 8% year on year growth for the metal – mainly due to the increased uptake in solar photovoltaic (PV) panels and electric vehicles (EVs).

“We have retained our positive outlook for silver industrial demand, both this year and looking further ahead, even if the global economy does face several headwinds,” Metals Focus said.

“Not only should newer areas thrust ahead, but established uses should also enjoy steady gains, in part as avenues for thrifting and substitution look limited.

“As such, we expect industrial demand to achieve successive highs over the short to medium-term.”

Today silver is trading at US$23.72 per troy ounce, and earlier this year Metals Focus predicted it would average around US$27.30 this year – with the potential to peak at US$32.

 

Industrial demand to grow 8%

 Metals Focus said that silver saw a 5% drop in offtake to a five-year low of 487 million ounces (15,142 tonnes) in 2020 as supply chains pared back their inventory – but that it rebounded in the second half of the year.

“The year-end strength was testament to the overall resilience of silver industrial offtake and the wide range of end-uses that contribute to the total,” the report said.

“The H2 2020 recovery has carried over into this year and helps explain the 8% y/y growth predicted for 2021 in the June issue of the 5-Year Forecast, which in fact takes industrial demand to a new high.”

Plus, silver is mostly produced as a by-product of copper, lead-zinc and gold mines, so as long as the demand for those metals is robust then the outlook for silver is steady.

 

PV gaining popularity

The Silver Institute predicts the 98 million ounces of silver consumed by PV panels in 2020 needs to at least double by 2030.

Essentially, more countries are installing at least 1GW of new PV capacity, with PV gaining in popularity as low carbon strategies take centre stage.

“In general, PV cells last around 15-20 years and so we are now seeing replacement units being produced,” Metals Focus said.

“This is noteworthy for two reasons, the first being that very little silver is recovered from old PV cells as some of the other materials in a PV cell are difficult to process, making it uneconomic to do so.

“Third, the manufacture of PV cells now exceeds newly installed capacity.

“Although it is difficult to say how important this currently is, what seems clear is that, going forward, replacement production will become an increasingly important area of silver industrial demand.”

 

Silver essential for electric vehicles  

In the automotive report Metals Focus produced late last year for the Silver Institute, it was estimated that auto-related silver demand could reach 88 million ounces or 2,700 tonnes by 2025.

This is essentially because silver’s conductivity and corrosion resistance make it essential in almost every electrical connection in an EV.

Average vehicle silver loadings are also higher in EVs.

Internal combustion engines (ICE) are estimated to use around 15-28 grams per vehicle, and in hybrid vehicles it’s around 18-34g per vehicle.

For EVs it’s higher still – at around 25-50g of silver per vehicle – so it stands to reason that as EV uptake increases there could be a corresponding increase in silver demand.

 

Ongoing chip shortage a factor

Plus, Metals Focus reckons the ongoing chip shortage has caused some high-profile disruption to key industrial segments – especially in automotive and consumer electronics.

“Current lead times to secure semiconductors are currently around 20 weeks, which suggests that supplies will, at the very least, remain tight well into next year,” it said.

“In fact, our research contacts in the chip sector have suggested that their order books will remain strong at least until 2023, all of which will be supportive of higher industrial silver demand.”

And when chip ordering returns to more normal levels, other industrial segments are expected to compensate.

“Two notable examples are electric vehicles and the deployment of 5G infrastructure,” the analysts said.

“Both are still in their relative infancy and so are expected to achieve extremely strong gains over the medium to long-term.”

 

Check out these ASX listed stocks with exposure to silver.

Code Company Price %Mth %SixMth %Wk %Yr MktCap
BML Boab Metals Ltd 0.4 -5 -7 5 -33 $ 60,161,267.37
ADT Adriatic Metals 2.71 -6 20 3 14 $ 496,160,832.14
S32 South32 Limited 2.915 -1 2 1 34 $ 13,743,141,758.22
RIM Rimfire Pacific 0.009 0 -10 0 50 $ 16,256,202.62
NCZ New Century Resource 0.175 -20 0 0 -10 $ 211,737,408.05
RDM Red Metal Limited 0.115 -8 -18 0 -15 $ 27,015,091.73
EQE Equus Mining Ltd 0.01 -9 -23 0 -44 $ 27,517,499.76
ARD Argent Minerals 0.029 -9 -61 0 -50 $ 24,551,775.47
MKR Manuka Resources. 0.29 9 -37 0 -55 $ 30,447,318.90
AGD Austral Gold 0.125 -7 -39 0 -56 $ 75,318,875.13
SFR Sandfire Resources 6.415 -2 3 -1 29 $ 1,151,503,611.18
IVR Investigator Res Ltd 0.064 -3 -36 -2 28 $ 86,056,529.46
BHP BHP Group Limited 45.13 -12 -11 -5 18 $ 134,177,433,399.12
MTH Mithril Resources 0.017 -11 -19 -6 -60 $ 39,953,961.70
SVL Silver Mines Limited 0.2025 -10 -10 -6 -12 $ 256,397,302.77
KCN Kingsgate Consolid. 0.705 -16 -27 -6 23 $ 154,964,768.90
HRZ Horizon 0.11 -4 5 -8 -19 $ 59,637,396.00
TMZ Thomson Res Ltd 0.1 -13 -39 -9 150 $ 48,722,488.61
BBX BBX Minerals Ltd 0.2 -13 -32 -11 -13 $ 100,764,724.50
WRM White Rock Min Ltd 0.325 -34 -46 -13 -52 $ 44,876,718.18
KSN Kingston Resources 0.165 -20 -27 -15 -43 $ 48,646,274.69

 

Boab Metals (ASX:BML)

The WA based explorer recently released results of 17m grading 3.39% lead and 15 g/t silver from a depth of 58m along with 17m at 3.02% lead and 13 g/t silver at its Sorby Hills project.

The drilling was aimed at testing and validating portions of the resource located near, but outside the current open-pit designs – with a view to incorporating the prospective tonnes into the definitive feasibility study (DFS) mine plan for the project.

Boab plans to drill 15 reverse circulation holes from September and is on track to release the DFS in quarter one CY22.

 

Adriatic Metals (ASX:ADT)

The Eastern-European-based silver player recently released the DFS for its Vares high-grade silver project in Bosnia and Herzegovina.

Adriatic improved economics from its PFS in 2020, with a post-tax net present value (NPV) of US$1,062 million and a post-tax internal rate of return (IRR) at 134%.

The initial capital cost is US$168 million with a payback period of 0.7 years and an all-in-sustaining-cost of US$7.3/silver equivalent ounces.

Essentially the company achieved this by simplifying the process design by removing the Veovaca open pit from the scope of study (to be considered in a future development phase) and reducing concentrate products from four to two.

This also had the added benefit of reducing project delivery and execution risks as the company works towards project financing.

 

South32 (ASX:S32)

The mining giant’s Cannington mine in Northwest Queensland produces around 3 million tonnes of silver and lead a year – and 6% of the world’s silver.

In its annual report South32 said its FY22 guidance at the mine has increased by 10% to 13,655 koz, with production expected to benefit from the operation’s planned transition to 100% truck haulage in Q4 FY22.

“Looking ahead, we expect to see strong volumes at our base metals operations – Mozal Aluminium, Cerro Matoso and Cannington – following investment in improvement projects that are designed to increase production into favourable markets,” CEO Graham Kerr said.

 

At Stockhead, we tell it like it is. While Boab Metals is a Stockhead advertiser, it did not sponsor this article.