Bullish Silver Industrial Demand
Outlook Projected Through 2015
A report by the Silver Institute forecasts a healthy outlook for global silver industrial demand, the largest component of annual silver fabrication demand. The report states that industrial uses of silver should rise sharply over the next five years to 666 million troy ounces (Moz) by 2015, representing 60 percent of total fabrication demand that year - a 36 percent increase over 2010's figure of 487 Moz.
The report, The Future of Silver Industrial Demand, was produced by GFMS Ltd., the world's foremost precious metals consultancy, on behalf of the Silver Institute.
The report assesses the future prospect of total silver industrial demand over the next five years, and where sector growth opportunities are likely to emerge.
Role and Impact of Silver Prices
Industrial silver demand is largely price inelastic in the short term. This characteristic is largely the result of the metal's unique physical properties, which means that substitution may only be feasible in a limited number of areas. Furthermore, the technological change required to enable a shift into or out of silver, when possible, typically takes a fair time. In addition, some companies may have greater exposure to other metals and so might devote research efforts to those metals in a multi-metal bull run. This was witnessed recently when several fabricators focused on minimizing copper use, rather than worry about smaller silver-bearing areas.
Another factor that limits price responsiveness is that silver typically represents only a small proportion of costs. This would be most apparent as regards the final consumption item (an air-conditioning unit or a car for instance) but production charges on intermediate semi-manufactured pieces could easily be greater than the value of the contained silver. This stands in sharp contrast to some of gold's industrial elements, with gold potassium cyanide costs for example being over 99% fine metal. The net result of this is that industrial buyers of silver bearing materials will invariably maintain steady orders to meet their internal demands, rather than flex purchases to suit silver's price moves.
A period of high silver prices might, however, induce producers of silver semis to seek ways to trim work- in-progress and thus silver finance costs. This would result in a one-off dip in offtake that would not be apparent from production figures. Despite that, the demand impact of a short to medium term price spike is therefore normally slight but it is important to note that substitution pressures are invariably constant; price differentials mean that researchers will essentially always be seeking avenues to use silver instead of gold or the PGMs and to use base metals to replace silver, the more common route.
So far, we have only considered gross demand but it is also worth considering the net figure, fabrication less scrap. Here the price can play a major role as the recovery of silver could be made profitable by a price move above a certain level or uneconomic by a slide below a given point. This would apply to both old scrap (say a discarded photo voltaic cell) or process scrap (a spent silver paste container for example). Of course, legislation might require recovery in many areas but its viability could influence the exactitude of compliance.
Outlook for "Established" Uses
The forecast for silver industrial demand constructed by GFMS, points to robust growth in the global total through to 2015, under each of GFMS' three forecast scenarios.
Starting with the Base Case (which presents the most likely outcome), industrial demand will realize a series of successive highs, comfortably exceeding 650 Moz by 2015. In fact, industrial offtake is expected to entirely recoup the losses sustained in 2009 as quickly as this year, although the growth rate in 2011 will fall short of the 18% gain recorded in 2010, given that widespread restocking (essentially a one-off event) contributed to that impressive outcome. Further solid gains are predicted for 2012-13, before a modest slowdown emerges in the last two forecast years, although annual average growth is still predicted to then exceed 4%.
GFMS' more optimistic GDP growth outlook (Scenario B) contributes to a notably more robust outcome. Although world GDP growth in 2011-12 falls a little short of last year's performance, this still contributes to double-digit percentage gains in global industrial offtake during this period. The slowdown, which subsequently emerges, is partly the result of weaker offtake in India (partially offsetting healthy gains elsewhere), which suffers from the dramatic rise in silver prices.
Finally, GFMS' most subdued economic prediction (Scenario C), sees silver industrial demand record only a slight improvement this year, in response to a marked slowdown in world GDP growth. As a result, industrial offtake only posts a record high in 2012. Subsequent years do produce firmer gains, but the market only surpasses 600 Moz in 2015, some two years later compared with the two alternative economic scenarios. The following analysis, highlighting the key end-uses, will concentrate on the response from each segment under Base Case conditions.
As the largest component of silver industrial fabrication demand, electrical & electronics will account for a significant share of the increase in overall industrial offtake from 2011 to 2015. The following section will focus on demand excluding photo voltaics, a detailed discussion of which is featured separately below.
After a major rebound of more than 20% last year, further increase in electronics & electrical is expected out to 2015. The healthy growth over the forecast will be due to an improvement in world economy, as the recovery of consumer expenditure will lead to higher sales of home appliances and consumer goods such as TV and cell phones. In addition, the robust growth in the automobile industry should also benefit demand for silver contacts. Not only is global auto production forecast to grow on average by nearly 6% between 2011-2015 but, (and arguably at least as important) is the rising number of electronic uses per automobile.
Over the period, we expect western markets to grow at a slower rate, where the focus is more on the replacement of old appliances for new. In contrast, many developing countries will continue to benefit from what is often a rapid urbanization of their population, with the associated rise in infrastructure expenditure and growth in demand for consumer electronics. Looking at the sector on a country-by-country basis, three markets stand out in terms of driving the global electrical & electronics offtake: the United States, Japan and China. The improvement in the United States is mainly because of ongoing strength in the country's automotive and housing sectors, while for Japan strong export of electronics products is the single largest important factor behind the rise. Finally, stable (albeit high) Chinese economic growth and rising disposal incomes will lead to a rapid expansion in domestic consumption, although further onshore relocations (to the mainland) will also contribute to China's robust performance in this sector.
As noted earlier, total industrial fabrication is forecast to rise by 37% from 2010 to 2015 and there are no obvious reasons as to why brazing alloy and solder (BA&S) demand should behave differently. It is true that part of the total's growth will stem from the arrival of new end-uses for silver but BA&S' share of industrial demand held steady in the 10 years to 2010 despite the boom in new areas such as photo voltaics.
That record gives us confidence in the ability of BA&S demand to shrug off the ongoing challenges posed by substitution to base metals and the adoption of techniques that use no BA&S. Indeed, fabrication growth of around 37% by 2015 would greatly exceed the forecast rise in global GDP between these dates of 17%, highlighting how BA&S offtake is expected to benefit from such factors as booming sales of cars and air-conditioning units in emerging markets. We would certainly place an emphasis on that, rather than the re-stocking of a denuded supply pipeline as that was very much a 2010-centered phenomenon. Another minor supportive factor is the likely slide in the use of cadmium in BA&S, due to environmental and health issues, with this in effect often replaced by silver.
At a country level, we may see marked dislocations between the fabrication and the consumption of BA&S, either at the OEM or final consumer level; sales of the final products may well surge in the likes of China and India but this could benefit BA&S fabrication in the industrialized world, unless we see further heavy relocation of either this fabrication or OEM manufacture to emerging markets.
The outlook for silver use in photo voltaic (PV) applications remains extremely bullish. Outside of Europe, which has accounted for around 70% of total PV installations to-date, the project pipeline remains strong, with notable additions expected in China, India and the United States. Egypt, Morocco and Israel are also expected to increase installations rapidly, albeit on a smaller scale. These, along with a host of other countries, are expected to drive growth over the forecast window, with total silver demand exceeding 100 Moz by 2015, roughly double the level achieved last year. Overall, the annual average rate of forecast growth through to 2015 is expected to approach 20%. While this might compare unfavorably with a rate of 50% per annum over the last five years, the industry is, to some extent, now entering a more mature stage, having emerged from its initial ramp-up phase.
The growth rate for PV production is, however, likely to be volatile. This is partly because of the difficulty in matching supply (of PV cells) to demand (in terms of installations), itself a function of government incentives, which have often "encouraged" high levels of production, sometimes leading to an oversupplied market. The balance of supply and demand can also vary quite rapidly depending on expectations of changes to incentive programs, which can spur a flurry of demand to lock in contracts at what might be perceived at preferential rates.
Overall, there are a number of factors underpinning our bullish forecast for silver demand in the PV sector. The first of these relates to the outlook for fossil fuel prices. The forecast gains for the oil price (within the confines of this report) will help to narrow the gap between the cost of generating traditional and solar power. This will, crucially, help speed the arrival of grid parity, the point at which the cost of generating solar energy will be equal to, or less than, the cost of conventionally generated grid power, by which time government support should, in many cases, no longer be necessary.
Second, the passage of carbon legislation may force conventional power providers to purchase carbon credits, thus leading to an increase in the price of such power and further levelling the playing field for solar. Third, political commitments will also help to drive PV demand. In particular, the European Union is committed, at present, to sourcing 20% of its total energy mix from renewable energy by 2020, compared with a threshold of around 15% last year. China, meanwhile, plans to increase its renewable energy output to meet more than one-third of its total power needs, compared with a threshold of over 25% last year. Finally, underpinning all of these factors is improving economic growth, which will likely sustain several existing government incentive programs, while also encouraging a number of new opportunities.
There are, however, a few setbacks which may curb the level of offtake over the forecast period. The greatest threat comes from the potential for government incentive programs, most likely Feed-in-Tariffs (FiT) to be withdrawn. In fact, these fears have already been realized in a number of key PV markets. Retroactive cuts to promised financial support (Spain), increased tax on solar energy production (the Czech Republic), earlier-than-planned cuts to incentive programs (Germany) and stalling activity elsewhere (including France and Italy), have affected investor confidence in the future of the industry. Developments in other renewable energy sources (currently dominated by hydropower and wind energy) may also mitigate solar's gains somewhat. It is also worth noting that solar power represents a tiny proportion of total renewable energy, which itself represents around one-fifth of total energy consumption.
Further downside risk to silver demand comes from the fact that manufacturers will seek to thrift or substitute precious metal content as much as possible, in order to reduce costs. Moreover, the share of thin film technology could exceed 20% by 2015. Nonetheless, thick film technology is likely to remain the clear market leader over the forecast period.
In conclusion, growth in this sector will remain heavily contingent on the sustainability of FiT programs and the health of the global economy. Despite some recent setbacks to FiTs, the long-term political will behind solar appears overall to be positive, as does consumer enthusiasm for green energy. In addition, delivery infrastructure for solar is also likely to improve further. As a result, the PV industry is expected to emerge as an ever-more significant end-user of silver over the next five years.
Established industrial offtake's other applications are notably diverse, ranging from decorative plating to silver rods for the nuclear industry. As a result, forecasting typical growth is a hard task. Nonetheless, some themes do emerge. Firstly, many of the sectors are mature, such as the silvering of mirrors, or traditional niches, such as end-use in musical instruments. It is highly likely therefore that their demand growth will be modest but should be largely resistant to substitution as silver would have already been removed if possible. In a similar vein is the use of silver in gold jewelry alloys but this could show more overt growth to 2015 as gold prices are likely to have fallen notably by then.
A second characteristic is that several applications are government controlled, such as the nuclear industry, or form part of large scale infrastructure projects. This means their offtake could be quite divorced from the business cycle, should prove fairly independent of price changes and be relatively resistant to substitution.
Of course, the boundary between what is established and what is novel is a grey area and in some instances we have classified existing niche areas, such as specialized uses in the medical industry, as 'established' but then treat them more as 'novel' when new applications within these broad categories become widely adopted and no longer involve just a few thousand ounces of silver. For the above three reasons, it is probable that growth in this 'other industrial' area in total will lag the electronics and BA&S sectors.
Novel and New Industrial Uses of Silver
There are a wide range of 'new' industrial applications of silver. This term may appear misleading as many of these products have been technically viable for some years, often capitalizing on silver's well established properties, particularly so its antibacterial and conductive qualities. However, this is one of the challenges that lies ahead for many of these uses; converting a proven technical proficiency into a long-term commercial success. As the following analysis shows, several applications have or are on the verge of achieving this mantle, but this does not always translate into consuming a substantial volume of silver. In other words, silver offtake per unit of demand for a new use may remain a niche application, in the context of the silver market. This conclusion is implicit from the statistical series constructed by GFMS. Bringing together our estimates for 2010, suggests that the combined total of the 11 uses outlined below amounted to less than 13 Moz, although, by 2015, this could exceed 40 Moz.
Solid-state lighting (SSL) uses semiconductors to produce light with either light emitting diodes (LED) or organic light emitting diodes (OLED), rather than the more traditional electrical filaments, plasma or gas. While there are subtle differences between the two, essentially they both produce electroluminescent light when a current is passed through electrodes. These electrodes can be made of silver.
SSLs could be used in backlighting and signage, although the technology is not yet capable of lighting high performance items, such as televisions. That said, SSLs are already used in traffic lights and in some car headlamps. At present, non-silver alternatives often encounter difficulties with dimming and uneven lighting; printed silver has been shown to perform far more effectively in these circumstances. In addition, silver's efficiency in this application means that the footprint of printed silver can be kept to a minimum, further aiding performance.
While the silver loading of each lighting element is currently small, there is nonetheless considerable potential for growth in this area as demand for SSL increases. As well as the above mentioned advantages, SSL offers high illumination, using considerably less energy than is consumed by incandescent or fluorescent bulbs. In addition, energy efficiency legislation has led to incandescent light bulbs being banned in a number of countries, such as Brazil and Argentina; in Europe, scheduled phase-outs began last year; and the United States plans to ban their use between 2012 and 2014. Although fluorescent lighting may initially fill the void, the use of mercury in fluorescents and the (arguably) poor light quality they provide, suggest they may only offer a short to medium term solution. The success of this technology could be greatly accelerated depending on the extent to which governments introduce regulation on incandescent lighting.
Furthermore, recent research suggests that cost- effective, high quality, low energy lighting may actually increase demand. SSL is less expensive (owing to its greater energy efficiency), which may encourage consumers to increase energy consumption by making more areas brighter, rather than simply maintaining lighting at current levels. Better technology, therefore, could simply generate greater demand. Although this might negate the intended effect of reducing energy use, this bodes well for silver offtake in this segment.
However, the current barriers to widespread adoption of SSLs are cost and some lingering performance issues. If both of these can be resolved, it would undoubtedly enhance silver demand (albeit from a currently small base, believed to be less than 1 Moz per year). Over the next five years, SSL is expected to expand its market share from less than 10% of the total lighting market to close to 30%. Should silver emerge as the electrode material of choice, therefore, annual demand could exceed 5 Moz by 2015.
Radio Frequency Identification
Radio Frequency Identification (RFID) tags make use of printed silver ink, made from silver nitrate. RFID tags can be used to track inventories and provide an alternative to bar codes, compared to which they can store considerably more data. In essence, their role is to transmit data stored on the tag (usually in a chip) to a reader, via an antenna. Silver can be used in the antenna and to form a bond between the chip and the tag itself. Nanosilver inks have already achieved some commercial use, which consume far less silver compared with conventional inks.
There are two main types of RFID tags, both of which use silver: passive and active. Passive tags do not have their own power source, and can only transmit information once they draw power from the reader, which achieves this by sending electromagnetic waves to induce a current in the tag's antenna. Active tags contain their own power source, and can therefore transmit information to the reader autonomously. These are typically reserved for high value goods, owing to their higher cost and performance capability.
Although the use of RFID tags is forecast to show tremendous growth, the prospects for silver are not necessarily as correspondingly strong. Not only is the actual amount of silver used per tag small in absolute terms (typically less than 10mg per tag and in nanosilver inks 10kg of silver can suffice for one billion tags). At present, the use of silver-bearing tags appears to have gained little ground. This is due to silver's relatively high cost, which has led to both thrifting and substitution, with non-silver printed inks, such as copper, aluminum and graphene taking market share. The uptake of silver-bearing tags may, therefore, be limited to high value, low volume items.
In 2010, global demand was estimated at around 1-2 Moz. However, given that the use of RFID technology is still in its relative infancy, silver should benefit from the sector's anticipated growth over the next five years, even allowing for the constraints outlined above. By 2015, therefore, total offtake has the potential to at least double, albeit from a modest base.
Supercapacitors
Supercapacitors offer a potential growth area for silver, where printed silver can be used as an electrode. A supercapacitor is similar in function to a battery, in that it stores and releases energy. Unlike a battery, however, it can be charged and discharged almost indefinitely, with (almost) no loss of performance. In addition, a supercapacitor can recoup and release power far more quickly compared with conventional batteries. Energy can be captured from a variety of sources, including a braking vehicle, wind power, the national grid or from solar energy.
This power can then be applied in a myriad of ways, including: a source of back-up, should there be grid disturbances or outages; in regenerative systems, such as in hybrid buses, where energy from braking can be stored and then released as the bus accelerates; and in smaller applications such as power tools and torches, which require only small bursts of energy, and benefit from rapid re-charging.
Overall, this technology is likely to achieve commercial success, although the trend towards miniaturization and the use of nanosilver is likely to limit the absolute volume of silver demand. In addition, less expensive alternatives are also likely to develop. Given that this represents a new form of technology that is likely to use, at best, modest volumes of silver, we do not anticipate that more than 1 Moz of silver will be consumed by 2015.
There are several ways in which silver can be used for purifying water. The most widely used applications make use of silver's bactericidal properties, in forms including silver-impregnated ceramic filters, silver deposited on activated carbon, silver nitrate, silver chloride or in tetrasilver tetroxide. Silver is also used as a catalyst for the production of hydrogen peroxide, which is in turn used in water disinfection. It can be used in building water supply systems, pools, spas or personal water purification devices.
In water supply systems, it can destroy bacterial growth in pipes, connections and tanks; in pools and spas, silver ion filtration canisters treat all components; and in personal purification devices, it prevents bacterial and fungal growth that would otherwise block the active charcoal filter. At present, silver-based water treatments are used more widely in Europe than in the United States.
There does not seem to be undue concern regarding the safety of using silver in water purification devices. The World Health Organization (WHO) states that a lifetime intake of approximately 10g of silver can be considered to be the 'no observed adverse effect level' (NOAEL). The maximum contaminant level of silver in drinking water ranges from 0.05mg/L to 0.10mg/L, of which only a small percentage is absorbed. According to the WHO, levels of up to 0.10mg/L would give a total dose over seventy years of 5g of silver ingestion (half the NOAEL level).
Given the scope for water consumption to rise in response to global economic growth, therefore, there is considerable scope for silver use to rise in this application. That said, this is unlikely to reach significant volumes over the forecast period in comparison to established industrial silver users. Indeed, at present, global silver demand in water purification applications is estimated to be roughly no more than 2 Moz per year. Furthermore, silver tends to be used in personal water purification devices, rather than large scale municipal devices, which commonly depend on some form of chlorine (or chlorine compounds) for disinfection. Looking ahead, however, there is considerable growth potential, and offtake in 2015 may reach 2-4 Moz.
Silver is often used in wound treatments, dressings, powders and creams, which make use of its anti-microbial action against yeasts, moulds and bacteria. It is used in a variety of forms, including silver sulfadiazine, silver chloride, silver sulfate and nanocrystalline silver. With regard to wound dressings, studies have shown that dressings containing silver increase the comfort level for burns patients by minimizing adhesion between the wound and dressing, thereby reducing pain when changing dressings. Furthermore, the frequency of changing dressings might also be reduced, owing to the antimicrobial activity of the silver. Clinical evidence also supports the efficacy of silver as an antiseptic (which can take many forms, including gels, sprays and powders) for infected wounds.
Silver can also be used in catheters, which are made with a silver-based anti-microbial coating, as well as for other medical implantation devices such as prosthetic heart valves and vascular grafts. In urinary catheters, research has shown that the use of silver alloys reduce the incidence of urinary tract infection (UTI) by as much as threefold compared to non-silver bearing types. Despite the initial higher cost of the silver-bearing products, therefore, the longer-term benefits of reduced spending on aftercare may justify the economic cost of using these materials.
With regard to silver demand, current offtake is estimated to be slight. To give an indication of the quantities involved, the silver content in bandages is typically measured in mg/100cm2, and in creams in terms of milligrams(µg)/cm2 per application (one of the world's leading bandage manufacturers consumes only around 7,000 ounces of silver per year). Total silver demand in all medical applications, therefore, is estimated to have reached less than 0.5 Moz last year. This is, however, likely to grow strongly over the forecast, and although total volumes are unlikely to have a significant impact on the silver market, silver use in medical applications may grow strongly over the next five years to approach some 3 Moz by 2015.
Food Packaging
Some food packaging uses silver for its hygiene benefits, which is often applied as a coating or embedded in a polymer. Cooking utensils, kitchen detergent and refrigerators also make use of silver's antibacterial properties, also mostly in nano form.
As is the case with nanosilver in general, one issue is the current lack of clarity regarding their use, which opes the prospect for regulations to be applied retrospectively. Although the EU Food Packaging Regulation covers all materials that come into contact with food or drink, nanosilver has not yet undergone new safety assessments. This is because nanosilver has not been deemed an 'existing' product, as 'ordinary' silver has already been addressed. Similarly, the United States has not classified nanosilver as an 'existing' chemical. In addition, in the United States food packaging containing nanosilver falls under the remit of both the Environmental Protection Agency (EPA) and the FDA (Food and Drug Administration Agency), with the former regulating the pesticidal aspect and the latter the container itself. Notwithstanding these concerns, the food hygiene sector is unlikely to become a major silver consumer. It is modest in terms of absolute use; last year we estimated consumption at comfortably less than 1 Moz. Nonetheless, it has the potential to at least double over the forecast period, exceeding 1 Moz by 2015.
Hygiene
Nanosilver is also commercially available in a number of other applications. These include fridges that have been coated with nanosilver to create an anti-bacterial and anti-fungal environment. In addition, washing machines have been engineered to release silver ions through electrolysis, which also works to combat bacteria and fungi. These allow for lower temperature washes with less detergent, enabling consumers to save on energy and water consumption. One such widely available model contains 10g of silver, which is designed to last at least 10 years. This is said to typically release 0.05mg/L per wash, which equates to 2.75 mg of silver ions. Half to a third of these ions are imparted onto the washed items, while the remainder is flushed into the sewage system.
Textiles, including socks, sportswear and bedding have also been produced using nanosilver, for antibacterial protection and odor control. Silver has also been included in products such as air purifying sprays, hair dryers, toothpaste and soaps to name but a few.
Silver is also used for hygienic purposes in other ways, in products such as hospital gowns, bedding, door handles, counter tops, bed rails and paint. Silver use in paints and lacquers is relatively small, and is likely to remain a marginal end-user of silver; a commercially lacquer contains silver particles at a concentration of 100-300ppm silver/kg lacquer. Antimicrobial paint containing nanosilver is also available, although this is expected to be restricted to specialist (and therefore niche) applications. The silver content is higher here, estimated at around 0.4g contained in 1kg of paint.
Finally, cleaning agents containing silver, used in both the domestic and pharmaceutical industries, have also been developed. In totality, however, the use of silver in hygiene products is unlikely to emerge as a major end-user of silver, due to the relatively small amounts of silver required. Over the next five years, total offtake in this diverse range of uses is not expected to reach significantly higher than 3 Moz.
Silver use in wood preservative can take a number of forms including: silver oxide, nitrate, chloride, bromide, iodide and thiosulfate. One argument behind the optimism in terms of silver's potential role in this area followed the voluntary withdrawal of Chromated Copper Arsenate (CCA) in the United States in 2003, which had been the dominant material in the wood preservative industry. As a result, CCA is no longer available for use in most residential applications, owing to toxicity concerns in arsenic and chromium (VI), its two main components.
Silver has displayed a number of characteristics that indicate that it may be a realistic substitute for CCA. It has proven effective in performing the main functions of wood preservation, namely protection against wood decay fungi, efficacy against termite damage, mould inhibition and insolubility in water.
However, it does offer one main drawback, which may well prevent it from becoming a mainstream ingredient in wood preservation. The first of these is its relatively high cost, a major issue for an industry that is characterized by low-margin products. In general, the minimum cost for a silver solution with anti-fungal qualities is around $0.29/litre, compared to around $0.11/litre for non-silver, non-arsenate preservatives. Therefore, in order for silver-based treatments to be cost-effective smaller quantities of silver will need to be utilized. With this in mind, we would suggest that further research is necessary to achieve the required balance between performance and cost. The main copper-based alternatives include alkaline copper quat (ACQ) and copper azole (CA).
In addition, silver-based biocides have shown lower leaching rates than some copper-based alternatives, which require more "fasteners" and are therefore more expensive than CCA. Nonetheless, the extent to which silver may come to be used as a significant ingredient in wood preservatives is still heavily dependent on results of further research, which will need to address both cost and environmental concerns.
As a result, we currently believe that these issues are likely to limit the potential take-up of silver-based preservatives. Over the next five years, therefore, global growth is forecast to rise from less than 0.2 Moz in 2010 to just over 3 Moz in 2015.
Batteries (predominantly button types) already constitute an established end-user of silver, but have been included in this section as they are an area which, although relatively small now, offers the prospect of far higher demand over the forecast horizon; current annual demand is estimated at around 5.0 Moz of silver.
There are two main kinds of silver-bearing batteries: silver oxide batteries, which generally have a low power capacity, and silver zinc batteries, which boast higher capacity. The characteristics of both include long operating and shelf life, as well as a high performance to weight ratio.
Silver zinc batteries offer the strongest scope for growth over the forecast period, although the silver oxide sector is also likely to show gains. This is due to robust growth expectations in a number of end products, including: smart phones, laptops, and tablets. Performance is the primary consideration here (silver zinc batteries currently offer energy density that is some 40% higher than lithium-ion batteries, a differential which is expected to grow wider), and this is likely to outweigh silver zinc's higher cost.
Another use for silver zinc batteries may be the auto industry, specifically in electric cars. Although research and development is currently focused on lithium-ion batteries, silver zinc batteries may prove to be a safer choice, given concerns regarding the latter's propensity to overheat. Silver zinc has also been billed as a 'clean' technology, due to the fact that both the silver and zinc can be recycled once the battery life has ended.
Silver oxide is also utilized in a diverse range of batteries. At one end of the scale, it is extensively used in button types, that on average each consume one gram of silver, which are found primarily in wrist watches, as well as other small devices, including: hearing aids, cameras and pagers. The oxide also finds favor in large-scale applications, such as missiles, submarines, underwater and aerospace applications, where cost considerations are far outweighed by performance issues. (As an aside, silver-chloride batteries have also been used in these larger applications.) Silver oxide batteries have also found a role in aerospace and military applications, due to their high performance and ability to tolerate high current loads.
Looking ahead, the prospects for battery-related demand are extremely bright. Indeed, by the end of the forecast, silver demand in such applications has the potential to soar to a range of 10 to 15 Moz per annum.
The potential to use silver as an autocatalyst first made the headlines three years ago, when Mitsui Kinzoku announced the development of a silver-based technology, which could be used to replace platinum in a diesel particulate filter (DPF). This was initially discussed in the context of off-road applications (such as agricultural vehicles and construction equipment), where emissions legislation was soon to be introduced.
Three years on, and emissions requirements for off- road vehicles have become a reality. In the United States and the European Union (EU), Tier 4 emission standards (and their EU equivalent) will be phased in from the beginning of 2011 and will be fully effective by 2014. In addition to the technology developed by Mitsui, Tenneco (a manufacturer of emission control systems) has recently announced the introduction of another technology which negates the need for PGM loaded diesel oxidation catalysts, which instead are substituted with a silver-based Hydrocarbon Lean NOx Catalyst (HC-LNC).
At present, the exact level of silver consumed per catalyst is unknown. We believe, however, that it is likely to be significantly higher than that required by platinum, although it would of course be considerably less expensive. However, while this may have a bearing (albeit modest) on the platinum market, as a proportion of absolute silver demand, its impact will remain extremely limited, at least in the context of this report's timeframe. That said, the off-road sector does feature a diverse range of applications, although it is too early to say what share of the market this technology might serve, or indeed, whether this silver- bearing catalyst might in fact migrate into the far larger on-road diesel market. Over this forecast, therefore, this technology is unlikely to emerge as a meaningful end-user of silver. We are of the opinion that this is likely to remain a niche product and do not expect annual demand to significantly exceed 100,000 ounces by 2015.
Silver can also be used in superconductors (SC), which conduct electricity far more efficiently compared with conventional cables. In terms of the latter, not only does the age profile of the installed infrastructure increasingly call for renewal investment (conventional cables typically have a life span of around thirty years), but the tunnels that house the cables are becoming increasingly short of space, as a growing number of cables have, over time, been added in order to cater for increased demand for power.
SC cables offer a viable solution to this problem as they occupy around one-sixth of the space required by one conventional cable. Moreover, because of the far greater capacity which characterizes SC, once in place, their transmission power can be increased (up to a far higher level than conventional cables), without having to disturb tunnels in order to lay additional cables. The technology can also be used in a number of other applications, which use the electrical energy passed through the wire to create a powerful magnet, which can, for example, turn a motor. This therefore offers the potential to use SC in applications ranging from hard disks to cargo and passenger vessels, as well as magnetic levitation trains and medical equipment. Although silver is renowned for its conductive qualities, it is not for this reason that it is used in SCs. Rather, its main role is to act as a carrier material, in which a bismuth-based conducting object is embedded. Silver is used because it is a noble metal and so will not react with the conducting material. It also offers fast heat diffusion, which further enhances its efficiency.
There are several types of SCs under development, and although some variants do not use silver, prevailing research indicates that a silver-bearing variant is close to commercial use. At this early stage it is hardly surprising that silver demand remains modest; current production of the wire has only reached around 500km, which equates to less than 100,000 ounces of silver. In Japan, the country's first power grid using SC cables is slated for testing in Yokohama this year, with tests also ongoing in the United States.
With regard to the outlook for silver consumption, this depends greatly on securing contracts with regional or national power grids, which in turn partly depends on the prospects for economic growth, as this will impact a government's ability to support the required capital expenditure. Furthermore, the technology is still in its relatively infancy, with commercial operations in Japan only expected to start in 2015. Its long-term future, therefore, remains somewhat uncertain, as not only is its success highly contingent on large scale government support, but its viability also depends on the absence of alternative, non-silver bearing technologies. As a result, we estimate that demand may still fall short of 2 Moz in the final forecast year, bearing in mind that any large-scale acceptance is likely to only emerge beyond the scope of this report.
Michael DiRienzo, Executive Director of the Silver Institute. "This report maintains that we expect to see robust gains in industrial silver demand over the next five years, further emphasizing silver's essential role in industry," DiRienzo added.
Editor's Note: GFMS Ltd. is the world's foremost precious metals consultancy. GFMS is credited with producing the most authoritative, independent surveys of the gold, silver and PGM markets, in the form of the annual Gold Survey, World Silver Survey and Platinum & Palladium Survey.
For more information on GFMS products and services visit the website at www.gfms.co.uk.
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