Silver’s inelastic supply will be overwhelmed by skyrocketing demand from solar panel manufacturers, according to Peter Krauth, editor of SilverStockInvestor and author of The Great Silver Bull.
Krauth sat down with Kitco at The Mining Investment Event of the North in Quebec City on June 20. He said supply has actually been falling since 2015 on balance, and he doesn’t see any obvious solution on the horizon to address projected silver shortfalls.
“Miners are struggling to find silver, and to get it out of the ground,” he said, and noted that weak silver prices are not encouraging more silver production.
“I would say that the all-in sustaining cost to produce an ounce of silver is probably around $18 to $20 an ounce,” he said. “Margins at $24 or $23 are okay, but there’s not a huge incentive to go out and find silver and produce it, and it takes 10 to 15 years to go from finding an economic deposit to getting the silver out of the ground.”
He said that silver is also quite particular in that most of the supply comes as a byproduct of other mining operations, which further hampers the ability of production to respond directly to increased demand.
“Less than 30 percent of it comes from primary silver mines,” Krauth said. “More than 70 percent of silver depends on producing gold, lead, zinc and copper, so the supply of silver coming to market is very much dependent on the production of these other metals.”
Krauth said that because of these limiting factors, even when the silver price spikes and producers have a big new incentive, silver supply will lag for some time.
“The silver supply is very inelastic to price,” he said. “Silver could go to $30 and stay there for a year, or a couple of years, and my guess is it would do very little to increase the mine supply. So really, when you look at the big picture, the supply side is very much restrained.”
Turning to demand, Krauth said one way to measure the potential increase in silver consumption from solar is by looking at the growth projections for solar power generation.
“The International Energy Agency projects that between 2021 and 2030, we’re going to produce seven times more electricity from solar,” he said. “The annual growth on that is at 25 percent.”
Krauth said this doesn’t even account for new solar cell technologies, which use between 50% and 150% more silver per watt. “If I had to venture a guess in terms of how much silver that’s going to require, it would not surprise me if it required half to three quarters of all of the silver supply every year,” he said.
“A 25% year-over-year increase over the next eight years, it’s enormous.”
0:00 – Silver an ‘asymmetric opportunity’
1:51 – Silver undervalued vs other metals
2:25 – Latest demand data
4:39 – Updated solar projections
10:36 – Silver supply
13:44 – Interest from gold miners
15:47 – M&A magnifies investor upside
17:25 – Silver stock picks
Coverage sponsored by EMX Royalty
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10 Comments
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Silver is indeed an important component in solar panel production, primarily used in the creation of photovoltaic cells. However, it is important to consider multiple factors when evaluating the potential supply-demand dynamics.
Great interview- thanks! This is what I come to Kitco for, not the macro economic information or crypto discussions that are so often aired on other Kitco channels.
Despite the fact that I invest, I am disheartened by my incapacity to assess each company's performance and decide whether or not now is the best moment to buy stocks. Inflation is consuming my money supply. I now require accurate market trajectory data, but I'm not sure what to do about it.
been hearing all these narratives around silver for 15 years now and none of it ever seems to be reflected in the silver price.
Peter is right on !!
I am sure Silver will get more than $100 onze within the next 100 years
Yes, but there are astronomically huge amounts of paper silver that can be used.Ask Comex and JP Morgan.
Solar is one thing, what about all the EV cars?
Peter could be a provider for The Onion! The guy has zero credibility!