The industrial demand for silver
Silver has many industrial uses, accounting for more than half of annual demand worldwide over the last five years.
This means that economic growth can affect silver prices far more than it affects gold. Only 10-15% of annual gold demand worldwide comes from industrial use, the rest going to jewelry and investment.
Because of silver's physical strength, brilliance, malleability and ductility (it can be squashed or pulled into shape), people have also used silver in jewelry, tableware and fine art for thousands of years. Industrial applications use silver's conductivity (the highest of any element for electricity and heat) as well as its sensitivity to light and anti-bacterial qualities.
Today silver is invaluable to solder and brazing alloys, batteries, dentistry, glass coatings, LED chips, medicine, nuclear reactors, photography, photovoltaic (or solar) energy, RFID chips (for tracking parcels or shipments worldwide), semiconductors, touch screens, water purification, wood preservatives and many other industrial uses. Washington-based industry group the Silver Institute calls it "the indispensable metal".
The biggest consumers of silver for industrial applications this past decade have been the US, Canada, China, India, Japan, South Korea, Germany and Russia. Over that time silver demand from older industries has faded, only to be replaced by new technological uses.
Here we look at three major industrial uses of silver – photography, solar energy, and medical – and how they are changing.
Photographic silver use
Photography used to be the No.1 end-use of the silver, using silver nitrate to create light-sensitive halide crystals. This sector includes consumer photography, the graphic arts and radiography (x-rays), both in medicine and industrial inspection of heavy machinery.
Photographic silver demand hit its peak in 1999, representing 25% of total fabrication. The film market in the United States alone used over 93 million ounces of silver that year, more than one ounce in every ten sold worldwide. Within five years, however, photographic demand slipped below 20% of total demand, and it fell to 9% by 2013.
The growth of digital photography has played the greatest part in this decline. Still-photography used in x-rays remains a big consumer of silver, but total photographic demand has contracted 70% by weight from its peak.
Photovoltaic (solar energy) silver demand
Silver's sensitivity to light has found fast-growing use in the photovoltaic, or solar energy, industry. Using silver as a conductive ink, photovoltaic cells transform sunlight into electricity.
Photovoltaic use first made an impact on silver demand in 2000, just as photographic use began its decline, with the sector consuming 1 million ounces that year. This was not even one tenth of the amount used by the electronics industry, but by 2008 the photovoltaic sector was consuming 19 million ounces per year as major government subsidies promoted the industry's growth in the US, Western Europe and particularly China.
Photovoltaic demand for silver exploded on these taxpayer subsidies, growing at a 50% annual rate and starting to fill the gap left by the declining photographic industry. But with subsidies then cut as the financial crisis wore on, and with silver prices doubling in 2011 to hit almost $50 per ounce – the all-time peak set in January 1980 – silver industrial demand declined for three years running.
Higher prices meant technology developed to use less silver in producing the same amount of solar power. This "thrifting" has now cut the quantity of silver by up to 80% per solar cell from a decade ago. So despite a rise in total solar panel production, US photovoltaic demand for silver has actually fallen in recent years. In Europe, those earlier government subsidies led to huge over-production, and excess capacity in the industry saw many solar-cell manufacturers go bankrupt, also hurt by competition from China.
Even so, global photovoltaic demand for silver has grown at a compound annual rate of 20% over the last decade, according to the Silver Institute's World Silver Survey 2014. China is now the leader in solar-panel manufacturing, producing 60% of 2013's global output. Solar capacity in China leapt from 0.8 to 18.6 gigawatts between 2010 and 2013, with Beijing setting a target of 70GW by 2017.
Medicine's growing silver use
Of all chemical elements, silver has the most powerful antibacterial action with the least toxicity to animal cells. Because like the other, more expensive precious metals, it interrupts the ability of bacteria cells to form certain chemical bonds essential to their survival. But cells in humans and other animals have thicker walls, and are so undisturbed.
When added to water, silver releases silver ions. These ions also kill and prevent biological growth, again disabling the metabolism of germs and hindering their membrane functions. The value of these properties has been known and used for centuries.
The Ancient Phoenicians, for instance, found they could keep water and other liquids fresh by storing them in silver-coated bottles. American pioneers 3,000 years later prevented dysentery, colds, and flu by putting silver dollars in milk bottles. Silver biocides are today found in hospital water systems, catheters, furniture and almost every tool in the operating theatre. Silver-copper ionisation has also been approved as a primary treatment for long-term control of legionella in air-cooling systems.
Silver nitrate was used in the late 1800s to cure new-born babies of certain eye infections, and doctors found that wounds healed faster with silver dressings. The metal was used in sutures for surgical wounds and to cure ulcers – a use which continues today, with silver-embedded bandages proven to be especially effective in healing the wounds of burn victims.
During the 1920s, over 3 million prescriptions per year were written in the US for medications containing silver. Due to the introduction of penicillin in the 1940s, antibiotics became the standard treatment for bacterial infections, and this use of silver diminished. But new scientific research has since allowed fresh expansion of the medical industry's use of silver.
Nanotechnology uses silver as an antimicrobial, reducing the metal to particles measured in billionths of a metre. This nanosilver acts as a catalyst for oxidation, generating oxygen from air or water which destroys the cell wall membranes of single-cell bacteria. Because it only "turns on" this reaction, it does not pollute the surrounding environment.
In sum, there is much more to silver than its historical use as a monetary metal, or its ongoing use in jewellery and investment. Industrial and technological use of silver accounts for well over half annual demand. That demand plays an important and changing part in helping set long-term price direction.