The Future of Silver
Industrial Demand
Commissioned by the Silver Institute
Prepared by GFMS Ltd
March 2011
2 Independent - Informed - International
The Future of Silver Industrial Demand - March 2011
© GFMS Limited 2011, The Silver Institute. All rights reserved.
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3Independent - Informed - International
The Future of Silver Industrial Demand - March 2011
Table of Contents
1.0 Executive Summary 5
Introduction 5 • Economic and Price Forecast 5
Industrial Demand Forecast 6
2.0 Historical Review 9
3.0 The Role of Silver in Industrial Demand 12
Introduction 12 • Technological Advantages of Silver 12
Production Stages 13
4.0 Industrial Applications Today 18
Introduction and Summary 18 • Electrical and Electronics 18 • Photo Voltaics 19
Brazing Alloys and Solders 20 • Ethylene Oxide 21
5.0 Future Industrial Demand for Silver 22
Introduction and Summary 22 • Economic Forecasts 22 • Role & Impact
of Silver Prices on Industrial Demand 24 • Outlook for “Established” Uses 24
Novel & New Industrial Uses of Silver 27: Solid State Lighting, Radio Frequency
Identification, Supercapacitors, Water Purification, Medical Uses, Food Packaging,
Hygiene, Wood Preservatives, Batteries, Autocatalysts, Superconductors.
Focus Boxes
Industrial Silver Applications: Silver Related Production Stages 14
Silver Industrial Fabrication: Defining the Country of Origin 17
Nanosilver: An Introduction 27
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The Future of Silver Industrial Demand - March 2011
Units used:
supply and demand data are given in units of metric tonnes.
1 Moz = 31.103 t (metric tonnes)
1 tonne = 32,151 troy ounces
1 tonne = 1,000,000 grammes (g)
Terminology:
“-” = not available or not applicable
0.0 = zero or less than 0.05
“dollar” refers to the US dollar unless otherwise stated.
Prices:
Unless otherwise stated, US dollar prices are for the London Silver Market fixing.
Table Rounding:
Throughout the tables and charts, totals may not add due to independent rounding.
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The Future of Silver Industrial Demand - March 2011
1. Introduction & Executive Summary
Industrial Demand Forecast1.0 Introduction
In recent years, silver industrial demand has greatly
expanded its role in the global silver market. This has
largely been due to tremendous growth in industrial
offtake itself, although weaker performances elsewhere
(photography and silverware in particular) have helped
to further raise its share of global fabrication demand
To put silver’s industrial demand growth into
perspective, in 1990 it stood at 273 Moz, representing
a respectable 39% of total fabrication demand. By the
turn of the millennium, the global total had grown by
100Moz, which saw its share exceed 40% for the first
time. After a setback in 2001 (when the technology
bubble burst), industrial offtake grew uninterrupted
for the following six years. This culminated in a record
high of over 465 Moz in 2007, which accounted for 55%
of total silver fabrication.
Although silver demand suffered after the global
economic crisis that began in the latter part of 2008,
by 2010 industrial demand had already recouped most
of the lost output. In fact, although restocking of a
(heavily) depleted supply chain accounted for much of
the improvement last year, it is also clear that industrial
demand resumed its long-term secular rise, a trend
which is set to continue over the entire forecast period
under review in this report.
It is not surprising, therefore, that industrial demand
has garnered such attention. The Silver Institute, in
recognition of its significance for the future of the silver
market, has commissioned GFMS to provide greater
insight into this sector. This report therefore aims to
build on the work that GFMS has published in the World
Silver Survey, by examining in greater detail the role
that these uses are likely to play in the future.
We make a realistic assessment of the future prospects
of total silver industrial demand, and where the growth
opportunities are likely to emerge. In order to do so,
we have first assessed the scope for growth in the
established end-uses. Second, the potential market
impact of 11 more recent applications of silver, ranging
from wood preservatives to superconductors, are also
analyzed. By bringing together these two components,
we have generated a five-year forecast for global silver
industrial demand, covering the period 2011 to 2015.
1.2 Economic and Price Forecast
The economic outlook provides the most important
basis for determining the prospects for global silver
industrial demand, while prices are generally more
of a secondary concern. In terms of the former,
healthy western market growth over the past decade
has been an important contributory factor to the
strength in silver industrial demand, but arguably of
greater relevance has been the performance of many
developing countries, and especially markets such as
China and India. To put this into perspective, during
2000-08, GDP growth in China and India averaged
9.9% and 7.1% respectively, compared with a far more
modest 2.7% and 2.2% for the European Union and the
United States (respectively).
As a result of this strong economic growth, each
country has undergone a period of rapid urbanization
(which extends back much further than the past ten
years), a by-product of which has been a jump in both
infrastructure and consumer spending. It is of little
surprise, therefore, that both have seen a jump in
per capita GDP, with, for example, China realizing a
threefold increase over the past decade (although it still
remains relatively low, compared to western markets).
The following commentary focusses on GFMS’ most
likely outcome for the global economy, termed the Base
Case forecast. (Alternative economic scenarios, and
their impact on industrial offtake, are considered in
Chapter 5.)
© Copyright GFMS Ltd
(Base Case Scenario, million ounces)
2010 2015F
Industrial Demand 487.4 665.9
0 10 20 30 40 50 60 70
Industrial
Photographic
Jewelry
Silverware
Coins and Medals
% of Total Fabrication
2009
2015F
Demand split
Source: GFMS
2000
Industrial Demand’s Growing Importance
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The Future of Silver Industrial Demand - March 2011
Following last year’s healthy rebound in global GDP
growth to 4%, 2011 is expected to see a marked
slowdown, to a rate of 2.8%. This is for two main
reasons. First, it will partly reflect the absence of
several stimulus packages, which helped lift economic
growth last year. Second, inflationary concerns, as a
result of these stimulus measures, but also because of
rising commodity prices, will see governments look to
either curtail expenditure, or tighten monetary policy
(although the ability to do so will be limited, with
unemployment levels in many countries remaining
stubbornly high). Looking further ahead, GDP growth is
expected to edge higher, averaging 3.2% over 2012-
15, although this will still fall short of the performance
during 2000-08, when world GDP growth averaged 4%.
In terms of the price outlook, silver prices are forecast
to continue rising this year, with the annual average
comfortably eclipsing the 1980 record high (although
in real terms the 2011 forecast average will fall short
of the $55 posted in 1980). This will be driven in large
part by further inflows of investment demand, and
supported by additional growth in fabrication demand.
However, higher silver prices will tend to see efforts
increase in terms of thrifting or substituting away from
the white metal. That said, because of silver’s unique
technical properties, the ability to switch in favor of an
alternative metal has so far been restricted to a few
applications (such as multi-layer ceramic capacitors,
which have migrated away from silver:palladium to
copper:nickel compositions). Instead, the use of silver
in several established applications, particularly in the
electrical sector, could potentially be replaced with
nano silver. These uses would therefore continue to
benefit from silver’s technical properties, although the
absolute volume of silver demand could, in some cases,
be somewhat lower. However, any substitution favoring
nano products, although encouraged by prevailing
high prices, is only likely to emerge over an extended
period of time, and potentially beyond the scope of this
forecast (allowing not only for regulatory approval, but
also the time required for a supplier to qualify and then
“roll out” a new product).
Looking ahead to the remainder of the forecast, annual
average prices are then expected to drift lower, in
reflection of less robust investment in the silver market.
Even so, it is worth stressing that both prices and
investment flows will remain at historically elevated
levels in 2012. Indeed, next year will mark only the
second occasion when prices will have achieved over
$30 on an annual average basis, in nominal terms.
Thereafter, silver prices will continue to respond to what
will be a less supportive investment climate. Part of
the shortfall, created by weaker investment offtake, will
be absorbed by continued growth in world fabrication
demand. In particular, record levels of industrial
and jewelry demand will offset faltering offtake in
photography and coins & medals (although following
an initial bout of weakness, by 2015 silverware could
recover to 2009 levels). Although prices are therefore
forecast to drift lower through to 2015, average prices
are still expected to exceed 2009 levels by this point.
1.3 Industrial Demand Forecast
Before considering the outlook for silver industrial
demand it is worth briefly reviewing recent
developments in this sector. Following a relatively
subdued trend in the 1990s, during which growth
averaged 2.5% per annum, the next decade saw a
ratcheting up of this performance, with industrial
offtake rising by 3.7% (on average) through to 2008.
Although 2009 saw a sharp decline, this proved to be
largely a “one-off” event, with global industrial offtake
last year quickly recouping much of the lost output.
Looking ahead, a bullish picture for the future of silver
industrial demand emerges. From an estimated volume
of 487.4 Moz in 2010, the global total is expected
to post an interrupted period of growth through to
a record high of 665.9 Moz in 2015. Although it is
important not to overlook the contribution from ‘new’
industrial uses of silver, it is also apparent that much of
the growth in the global total will be driven by stronger
demand for a number of the established uses, two key
examples of which are outlined below.
GDP Growth Forecast: GFMS “Base Case”
-1
0
1
2
3
4
5
20142012201020082006200420022000
Source: GFMS; IMF
G
D
P
gr
ow
th
%
pe
r
an
nu
m
Real GDP Growth
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The Future of Silver Industrial Demand - March 2011
First, the robust increase in the manufacture of
electrical contacts reflects the success of an established
use, for example in terms of its development in
the auto industry. The use of electrical contacts in
cars has risen rapidly, not simply in response to an
increase in the volume of vehicles made, but also
because the number of end-uses for contacts, has
expanded. Indeed, the list of core uses has grown
considerably, from controlling windshield wipers and
seat adjustments, to managing navigation systems.
Features that were once the preserve of high-end
automobiles have, over time, become an industry
standard. Legislation has also played a critical role in
the auto industry, as it has mandated for ever greater
safety features. As a result, the latest electrical
circuitry, used in (for example) speed or distance
limiters, will most likely form part of an industry
standard in tomorrow’s auto market. Electrical contacts
therefore offers an example of an established end-use
that is in the process of effectively re-inventing itself.
The second example concerns the development of the
photo voltaic (PV) industry, which demonstrates how
exogenous factors have had (and continue to have)
a material bearing on a long-established use of silver
(in this case, its use as a conductive paste). Although
it is often referred to as a “new end use” of silver, the
use of the white metal in PV was first developed over
two decades ago, but until recently silver offtake in
this field remained slight. The market for PVs then
changed dramatically, as growing environmental
concerns increasingly focussed on generating power
from fossil-free sources. From this point, silver offtake
soared, from around 3 Moz in 2004 to around 50 Moz
in 2010. Further robust growth is also forecast for the
PV industry, with silver demand in 2015 expected to be
more than double the already elevated total for 2010.
In forecasting silver industrial demand, therefore, we
must consider which other established uses may go
the way of these two examples. In addition to these
segments, there are also a number of new uses of silver
that merit attention. Although the total contribution
from the new uses is expected to be more modest, at
least within the confines of this five year outlook, there
is the potential for a number of these segments to
boost their silver consumption, if only beyond the scope
of this forecast. As Chapter 5 shows, there are a wide
range of industrial uses for silver that have been, and
continue to be, introduced. Indeed, we would contend
that those we have highlighted represent only a subset
of potential new demand in the industrial sector, (not
least in terms of the prospects for nano silver, where
new outlets are frequently being discovered).
Nonetheless, the analysis in this Chapter highlights the
often modest amount of silver used per unit in many of
these categories. In other words, while it is clear that
a growing range of applications, such as medical, food
hygiene and water purification, have already gained
(and continue to gain) commercial success, the total
volume of silver demand for each application can often
remain relatively modest.
It is also worth noting, however, that this has often
been the case in many of silver’s established uses.
In the cell phone industry, for example, where per
unit silver consumption is estimated at 250mg, it
has required worldwide sales of 1.6bn units in 2010
to generate annual silver demand of around 13 Moz
(source: Umicore Precious Metals, GFMS). Likewise,
silver consumption per button battery is also extremely
small, yet en masse, the sector forms a respectable
portion of the industrial silver market. Should the
0
100
200
300
400
500
600
700
20152014201320122011201020092008
M
ill
io
n
ou
nc
es
Electrical & Electronics
Source: GFMS
Photovoltaics Brazing Alloys & Solders
Ethylene Oxide Other Industrial
World Industrial Fabrication Silver Demand for New Industrial Uses
0
5
10
15
20
25
30
35
40
45
autocats
food pack
supercaps
supercond
hyg
med
wood
water
rfid
ssl
batt
2015F2010E
M
ill
io
n
ou
nc
es
New uses 2010 vs 2015
Batteries
Source: GFMS
Wood Preservatives
Medical Uses
Hygiene
Superconductors
Supercapacitors
Food Packaging
Autocatalysts
Solid State Lighting
RFID
Water Purification
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The Future of Silver Industrial Demand - March 2011
number of independently small-scale users in
new areas of demand therefore proliferate, their
combined total consumption has the potential to
make a sizable impact on global silver demand.
Many of the new uses addressed in Chapter 5
center on silver’s antibacterial qualities. Washing
machines, face creams and socks, to name but a
few, are products which actively market their use
of silver. These show how the inclusion of silver
can make the difference between an “ordinary”
product and an extraordinary one. There is, in
essence, nothing new about these products, apart
Silver Consumption by End-Use, 2010 © GFMS Limited
Silver Consumption Product Total Silver
per Unit of Demand4 Demand5 Consumption5
Cell phones 250mg/handset1 1.6bn 13 Moz
PCs & laptops 1g/unit1 690m 22 Moz
Automobiles 10-30g/vehicle 72m3 36 Moz
PDPs 10g/screen 19m 6 Moz
Thick film PV 0.15-0.25g/cell2 14GW 47 Moz
Button batteries 1g/unit 156m 5 Moz
Source: GFMS, 1Umicore Precious Metals, 2Technic Inc; 3Light duty vehicles, Global
Insight; 4indicative and/or average metal content; 5estimated
this, the size and weight of electrical circuitry has been
driven significantly lower over the past 20 years, as
part of incessant trend towards product miniaturization.
The consumer electronics industry bears testament to
this trend. For example, the table above indicates that
average silver consumption per cellphone currently
stands at 0.25g, compared with around 0.35g per
handset in 2005 (source: Nokia); in the space of just
five years this represents a decline of close to 30%.
On a more positive note, silver is not always the first
target for cost-cutting, as other cost considerations
(such as silicon, in terms of PV) may supersede those
of silver, which often forms a relatively small share of
the cost of the final product. Third, silver enjoys an
increasingly high profile among the wider public, in part
because of its long-standing and positive association
generated by the jewelry and coin sectors, but also
because of the introduction of a growing range of
consumer items (as discussed above).
In conclusion, therefore, we expect to see robust
gains in industrial