The primary use for silver is industrial with over 40 percent of all silver used in industry, over 20 percent used in photography and only around 28 percent used in jewelry. The balance is split equally between investment and the purchase of silver coins and bars.
The industrial demand is mainly because of silvers unique properties, unavailable with other metals. These include:
The highest thermal conductivity of all metalsSo this demand is unlikely to diminish particularly as industrial needs continue to increase.
The highest electrical conductivity of all metals
The highest reflectivity of all metals
Unique chemical and anti-bacterial properties finding increasing applications in consumer products, medicines, and medical products
Industrial silver demand is relatively insensitive to price due to silver’s unique properties and also because small amounts of silver are used in
In the photographic market, despite the increase of digital photography, the use of silver remains undiminished and silver photographic paper continues to be used, particularly in China where the demand for lower total-cost conventional film is still present.
The jewelery market is very much a one way flow as, for example, the storage of silver for rural residents of India along with gold is common and so there is little turn over but a great deal of hoarding.
Additional to this the world silver stock piles are depleting as much less than 5 percent of all silver used is returned as scrap or recycled. Only 30 percent of all silver mined comes from primary silver mines (mines that produce silver only or as its main product). Over 70 percent is obtained as a byproduct of other mining activities. There are currently no new primary silver mines and if any are discovered, it will take many years to bring them into production.
Silver scrap has not increased marginally despite the increase of the average price moving upward. Most of the silver scrap comes from photographic films and papers, not silverware, or jewelry and such silver is a very small component of the retail price of silver anyway so there scrap value is virtually non existent.
As at Sept 2005 the net world inventories were less than 350 million oz. and declining. At that time the price of silver was 7 dollars an ounce giving a value to that inventory of 2.5 billion dollars. In 19650 the world stockpile was 10 billion oz. At the end of 2004 it was estimated stock piles had fallen to 419 million oz (per CPM group). So Us silver inventories have declined by 98 percent from a peak of 5.9 billion in 1942 to 115 million oz in 2004. And to ad salt to the wound, not all of that is 'registered" or available. The US Comex Exchange in New York holds, at the last count, 106 million oz and only 49 million oz =of that is categorized as "registered' or available for delivery.
This, plus the strong demand by investors for silver bullion is resulting in an overall stronger demand and higher prices. It is likely that silver will continue to climb in price and, although groups such as the New York based Comex Exchange may seek to regular the price by gradual issuing or "registering for delivery' some of their stock pile, the fact that there is not enough silver in the world to continue to meet future demands will be the main force driving that price range.
The bottom line means that, silver production is dropping by around 5 percent plus per year and less than one percent is recycled. As with any supply and demand, the less silver there is in the world available the higher the value of it will be. Particularly as the necessity of silver in the industrial, medial and it seems likely this is going to continue.
This is good news for silver investors who buy silver as, with prudent investing, they are quite likely to enjoy the profitable fruits of silver investment over the coming years.