Silver is increasingly becoming an industrial and an electrical metal, says Matt Watson, founder of Precious Metals Commodity Management LLC.
On Wednesday, Watson recorded an episode of Green Rush with guest Phillips Baker. Baker is president & CEO of Hecla Mining, the largest silver producer in the United States, and chairman of The Silver Institute.
Baker agreed that silver is less a monetary metal, like gold, than it used to be.
Nearly a third of the global silver supply, about 300,000 ounces, is now used for solar power. Other industrial applications include automotive, solder and brazing alloys, and water purification.
Silver is the most conductive material on the periodic table of the elements, followed closely by copper, making it ideal for electrification. Watson noted both metals are facing a supply crunch.
He pulled up a chart showing that "2023 we had a huge year for solar PV, there was a big uptake." He said in every scenario, he doesn't see supply keeping up with demand.
Baker agreed, noting the market has been in deficit for the last three years. He said it takes about 17 years to bring a silver deposit from discovery to production.
By Watson's calculations, silver output has been flat since 2005.
"We're looking at about 40 years' worth of material here," he said. "This is going to be hard to catch up to this demand and I can see us burning down our reserves very rapidly."
Watson and Baker diverged over the amount of silver demanded by solar.
Watson predicts solar demand will peak within the next decade, noting where high rates of solar installation have occurred, such as California, electricity has become more expensive.
"It's really going to become a question of how much solar do we need?" he asked.
Baker called Watson out on his peak solar demand thesis.
"Everybody who has said we're reaching a peak has been wrong. It's continued to grow," Baker said, emphasizing he is struck by the amount of additional silver being demanded by new applications.
Solar plus automotive, which adds another 200,000 ounces — EVs use more silver than gas-powered vehicles — comes to nearly half the amount of silver currently being mined.
"I can't see any scenario where this is going to drop, the demands seem to be built in as far as I could tell," Watson concluded.
"Photovoltaics are the central bank of silver," Baker summarized. "You have this base of demand that is going to continue to push the silver price."
Listen to Kitco Mining's Green Rush to understand and profit from a once-in-a-century event: the clean energy transition.
Each week, host Matt Watson, founder of Precious Metals Commodity Management, will take a deep dive into a metal that will underpin our new electrified world. Green Rush explores the vital role of nickel, copper, lithium, cobalt, silver, platinum group metals, rare earth elements and other metals that power the batteries driving our sustainable future.
