What impact has the demise of film photography had on the silver market...?
BACK in the good old days, a physical silver trader's dream would be to land a photographic company as a customer, writes Miguel Perez-Santalla at BullionVault.
Polaroid, Kodak, Fuji and many more were on this list of prospects. This industry was a tremendous behemoth in the silver market.
In fact Kodak was technically in the silver refining business. They had created operations to capture scrap silver as well to lower their costs of production for their film. In fact one spin off from the recent reorganization of the company is Rochester Silver Works
out of New York State. There were also many production sites that grew up in their vicinity. I am certain it was the same at the manufacturing plants of their competitors as well.
In 1999 the photographic market was to hit its peak of silver production. In the United States alone according to the US Geological Survey
, this market consumed over 93,000,000 ounces. Total global consumption was said to have been over 267,000,000 ounces of silver. This was real buying power for this industry but this was only the beginning of the end.
Since that time period demand has contracted almost 70% to date. I think the reason is obvious to anyone over the age of 23. What I'm saying is that a child of 10 years old in 1999 would surely recall the popularity of film. They will also recall that in the years of their coming-of-age photography became dominated by the electronic market. More specifically the use of digital cameras was to be the demise of silver consumption in this industry.
Recently, we see statistics of a dropping demand for digital cameras
but this does not mean a growth in the old film industry. This indicates a growth in cameras used in the smart phones.
Still photographic film remains a consumer in the marketplace. The medical sector which uses film primarily for x-rays has held up very well. But don't hold your breath hoping for resurgence in this sector either. As the new technology becomes cheaper, more and more hospitals and other users of x-ray film will convert to the digital world.
So what is this telling us today? Silver consumption by the photographic market, which at its height represented over 25% of fabrication demand, is still in decline. We have seen roughly a 12 to 15% annual decline over the last 10 years. It is projected that this year's photographic market demand will top out at 81.8 million ounces for global consumption according to CPM Group.
In the year 2003 photographic consumption worldwide represented roughly a little over 32% of total fabrication demand. Now it is down to only 9%. Fabrication demand is currently at about 81% of consumption of annual production.
Meanwhile in the period from 2003 to 2013 annual production grew 23%. Will a further decline in photographic demand or the complete disappearance of this once great consumer be a tremendous factor on the silver price? I say it's doubtful. But the fundamentals do mean something and to understand what has saved the price of silver from the loss of demand from the photographic market we have to look to the new industries that have filled the void.
In part two of this silver demand series
I will cover the changes in the marketplace over the last 10 years and what that means to the silver users and the silver price. Somebody is buying silver and we need to know why and who they are to better position ourselves for the next price move.