Silver Buoyed by Growing Industrial Demand
Source: The Market Oracle, Mike Stall (2/22/11)
"The general stock market's influence on the white metal is not going to go away."
Electronics is still one of the largest components of silver demand, accounting for more than 60% of the total industrial demand. The stronghold demand source of silver has been doing well over the past few years. Prior to the recession, the global market for electronic products was growing at an healthy annual average of about 13%, from USD 1.4 trillion in 2004 to an estimated USD 2.5 trillion in 2009. With the electronics and electrical industry reverting to a state of normalcy now, the future appears bright and shining. By 2012, the market is expected to reach approximately USD 3.2 trillion. Silver demand has also grown by leaps and bounds in new areas such as conductive silver inks and new applications in the nanotechnology field.
Increasing quality concerns ensure high use of silver in even ordinary switches and circuit-breakers. Emergence of structural changes in the technological front including silver-zinc batteries, solar (photovoltaic) batteries, RFID smart tags and antibacterial applications could result in substantial consumption of the metal.
Concerning alternative uses, silver is also employed in the production of chemicals for the USD 300 billion global plastics industry. Well over 700 MT (metric tons) of silver every year is required for the production of plastics.
The diversity of demand sources also make it shock-proof i.e. even if one leg of demand weakens the surge in others make up for the weakness.
One should be keeping an eye on a number of industries to comprehend the state of silver fundamentals. Silver's dependence on the industry is significantly higher than other precious metals. In other words, the influence that the general stock market has on the white metal is not going to go away.