Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Silver and Photovoltaic Solar Panels Demand

Commodities / Gold and Silver 2013 Jul 03, 2013 - 06:23 AM GMT

By: Adrian_Ash

Commodities

Miguel Perez-Santalla writes: How solar cells affected the silver price – and how it didn't...

The PHOTOVOLTAIC industry didn't start to show on charts of silver demand until the year 2000, when it consumed approximately one million ounces.

Those 31 tonnes were barely a blip on the silver consumption chart. In fact, in comparison to the smallest of the large consumers at the time – which was electronics – it was not even a tenth of their consumption.


Few expected the solar cell industry to become an important player in the silver market for years to come. Indeed, it was not until the year 2008 that the industry reached any volumes of importance, consuming nearly 19 million ounces (590 tonnes). That was barely 2.5% of total fabrication demand according to data from New York's CPM Group.

But what happened in silver's global economy was, in a word, government. Major subsidies were given for the development and promulgation of solar energy by sovereign states. Germany was at first the largest consumer, and was then followed by many other European nations in this objective. But it was not until Washington began to offer subsidies to US energy producers that the silver consumption for these products became of major importance.

The photovoltaic industry in certain countries became very important sectors of the economy. So with the global economic crisis starting five yeares ago, many were to suffer. Spain specifically suffered tremendous economic losses in this industry when the state pulled its subsidies. This has been a major concern for developers and business involved in solar energy.

However, this was at about the same time that the US began to offer subsidies to this industry. So people who sold or produced solar cells were finally poised to make money, now that the world's largest economy was behind it. At this point silver demand for the photovoltaic paste needed to produce solar cells was growing at a rapid pace.

Suddenly the last quarter of 2009, and going into 2010, saw photovoltaic demand for silver explode. Demand rose at a rate of 50% from the year before and would do so again in 2011. At this time the price of silver also began to soar.

Was this new demand the driver of the price of silver? The answer simply put is no. Unfortunately for this industry the timing could not have been worse.

The silver price began to move in leaps at the height of the photovoltaic industry's demand, raising the production costs of their end product. And because the PV industry needed a specific form of 999.9 silver (as opposed the standard 999 parts per thousand fineness in the wholesale market) the amount needed was not readily available. This caused a disruption in the marketplace. In a matter of a few months the silver futures market on the Comex exchange would go into backwardation, with near-term prices rising above prices for delivery further into the future.

Normally, when there is plenty of supply, the future price is higher than the current cash price for immediate delivery. But because of the need for the specific quality, much of the physical bars held on the Comex were being removed in search for the much-needed 999.9 fine silver. One of the largest silver producers in the world – Met-Mex Penoles of Mexico – was known to produce the proper quality bars and had delivered great quantities onto the exchange. So this led to the major withdrawals we saw.

During this time period there were many market commentators speculating that there was a physical shortage of silver. But the truth was there was plenty of 999.0 fine silver in large wholesale bars (typically 1,000 ounces, some 31 kilograms). Shortages of retail bars and coins for the investing public were caused by a bottleneck of fabrication. They were not caused directly by demand for silver by the PV industry.


Because of the coincidence of the price rise and the simultaneous demand from the PV industry, many other commentators attributed rising prices to solar panel demand. But taking a close look, the PV industry's demand only filled a small portion of the drop in demand from the silver market's traditional monster, which was photographic demand.

Silver mining producers were quite happy that the PV industry had entered the marketplace. Even though, for the foreseeable future, it does not look like they will be able to reach the capacity of consumption at which the once powerful photographic film producers had reached. But even though the PV industry is quite young, it has already been looking to thrift or replace the precious metal's use in production as much as possible because of the price rise in silver.

At the height of the solar industry's consumption in 2011, its demand had barely reached 19% of the height of the consumption of the photographic film industry in the year 2000. Add the problem of reduced government subsidies, and it will take quite some time for this industry to become the monster consumer the silver producers were looking for.

Silver has many industrial uses and its properties lend itself to constant new discoveries. With lower prices, consumption of silver for industrial purposes will remain stable or begin to rise. But higher prices at times are a detractor for the use of this metal.

Bottom line? The fundamentals of silver industrial demand, though important, are not what has been the principal driver of the price in the last 10 years. It has instead been the investment community that has truly filled the gap left by the departure of demand from the film industry, as we'll see in the third and last installment of this series. There we will cover who the major silver consumers are today, and what the future looks like it may bring.

Miguel Perez-Santalla
BullionVault

Miguel Perez-Santalla is vice president of business development for BullionVault, the physical gold and silver exchange founded a decade ago and now the world's #1 provider of physical bullion ownership online. A fierce advocate for retail investors, and a regular speaker at industry and media events, Miguel has over 30 years' experience in the precious metals business, previously working at the United States' top coin dealerships, as well as international refining group Heraeus.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules