Silver no longer the poor man’s gold as solar demand surges
The first big revolution in silver came in 1492 with the discovery of the New World, which opened up mining of the metal on a scale not previously seen. In the centuries that followed Hernán Cortés and the conquistadors’ destruction of the Aztecs, Peru, Bolivia and Mexico accounted for three-quarters of all world production and trade in the metal. Today, more than 877m ounces of silver are mined annually and the metal is increasingly being employed in new industrial processes. A major catalyst for demand over the next decade will be in the production of solar energy.
Silver is a key component in crystalline silicon photovoltaic (PV) cells. According to IHS, demand for solar power is set to increase by 30pc to 57 gigawatts of electricity in 2015. China alone is expected to install something in the region of 17 gigawatts of solar capacity by the end of the year, creating huge potential demand for silver.
The majority of PV cells use silver paste in their construction and that industry alone is expected to account for 70m ounces of supply through to the beginning of 2016. Silver demand for the PV industry grew by about 7pc last year and that rate of growth is expected to increase over the next decade. Despite the bright long-term demand picture for silver, prices for the metal have slumped over the past three years from an average of $61 per ounce to just under $17 per ounce. A major cause of this drastic drop has been China, which is the world’s major industrial user. Like all commodities which depend on Chinese factories, silver has suffered.