{"id":795,"date":"2024-02-08T12:59:28","date_gmt":"2024-02-08T12:59:28","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2024\/02\/08\/peter-krauth-silver-industry-at-inflection-point-as-strong-demand-meets-short-supply\/"},"modified":"2024-02-08T12:59:28","modified_gmt":"2024-02-08T12:59:28","slug":"peter-krauth-silver-industry-at-inflection-point-as-strong-demand-meets-short-supply","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2024\/02\/08\/peter-krauth-silver-industry-at-inflection-point-as-strong-demand-meets-short-supply\/","title":{"rendered":"Peter Krauth: Silver Industry at Inflection Point as Strong Demand Meets Short Supply"},"content":{"rendered":"

Since July 2020, the price of an ounce of silver has largely fluctuated between US$20 and US$26 per ounce, with a couple of exceptions. Where is the white metal headed in 2024 and beyond?<\/strong><\/p>\n

The use of silver in society dates back more than 5,000 years. First used to make jewelry and coins, it\u2019s found more varied applications as time has gone by. While it still enjoys its position as a precious metal, it is increasingly finding important roles in the electronics industry and in the worldwide transition to renewable energy sources.<\/p>\n

Speaking at this year\u2019s Vancouver Resource Investment Conference (VRIC), Peter Krauth, editor of the Silver Stock Investor and author of \u2018The Great Silver Bull,\u2019 provided insight on what investors can expect from silver in the future.<\/p>\n

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Tide could be turning for the resource sector <\/h3>\n

The resource sector has seen little interest from retail investors over the past 10 years, which has contributed to an undervaluation in mining stocks. Krauth sees a change coming on that front, and said that with interest rate cuts looming, the global macroeconomic environment is beginning to shift to a more positive position for the sector.<\/p>\n

He\u2019s predicting a strong decade ahead for commodities, and said he views record low levels of investment from institutional entities as a strong contrarian indicator.<\/p>\n

\u201cThere was a survey by Bank of America (NYSE:BAC), they looked at fund managers and asked them what their exposure was to commodities versus bonds, and we\u2019re at the lowest point that we\u2019ve been since March of 2009. So they\u2019re the most underweight (right now) for commodities versus bonds,\u201d he told the audience at the event.<\/p>\n<\/div>\n

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Is there enough silver to meet demand? <\/h3>\n

Krauth is optimistic about silver in particular, noting that it has held up well in the face of aggressive rate hikes.<\/p>\n

The metal\u2019s supply\/demand dynamics have helped to provide price support, with demand reaching record highs and mine supply shrinking. \u201cDespite record demand in silver, we actually had a shrinkage of 18 million ounces last year in supply, that\u2019s about 2 percent. The Silver Institute thought supply would actually be up,\u201d he explained.<\/p>\n

The biggest issue contributing to constrained silver supply is challenges that have limited producers\u2019 ability to get the commodity out of the ground and to market, most notably in Latin America.<\/p>\n

\u201cMexico, which is the world\u2019s largest silver producer, was actually down 12 percent last year,\u2019 Krauth said. \u2018A lot of that has to do with Newmont\u2019s (TSX:NGT,NYSE:NEM) Pe\u00f1asquito mine, which was offline for four months due to a strike. Peru has actually seen its mine supply shrink for the last six or seven years. We\u2019re down to levels we had 20 years ago.\u2019<\/p>\n

He doesn\u2019t see that changing any time soon. There are a limited number of silver projects in development, including some in Russia that seem uncertain, and one in Bosnia and Herzegovina that Krauth said is likely to go ahead. The closest to production is Endeavour Silver\u2019s (TSX:EDR,NYSE:EXK) Terronera in Mexico, which is expected to come online in late 2024.<\/p>\n

But new mines will have a limited impact on the supply gap due to the relative scarcity of primary silver mines in the world. Seventy-five percent of the world\u2019s silver is a by-product of mining gold, copper, lead and zinc. This puts silver in a tenuous situation if base metals operations face setbacks due to a recession or other economic instability.<\/p>\n

So far, shortfalls have been made up by aboveground silver supply, but Krauth sees this as a problem. He pointed to the Silver Institute\u2019s estimation that over the past three years silver has been in deficit by about 500 million ounces.<\/p>\n

\u201cOther than mining or recycling, you\u2019ve got people who are perhaps selling their holdings back into the market. You could have some exchange-traded funds that hold silver going back into the market, you have people taking delivery on futures contracts,\u2019 Krauth said during his talk. \u2018If you add all that up, there is supply that is meeting demand, but nobody knows exactly what the aboveground supplies are \u2014 you\u2019d have to assume a few billion ounces \u2014 but in three years, we\u2019re up to half a billion ounces. So you\u2019d have to imagine that can really only go on so long.\u2019<\/p>\n

Even though the silver market has posted deficits for the past three years, Krauth said 2023 saw a slight reduction in demand owing to declines in demand for jewelry, silverware and physical investment; however, he noted that these categories were essentially reverting to their mean following strong demand in 2022.<\/p>\n

Krauth anticipates a bounce in demand in 2024 on increasing industrial usage. At the beginning of last year, the Silver Institute was forecasting demand growth of 4 percent for the industrial segment in 2023, but by November the organization had revised that forecast up to 8 percent, representing a record 632 million ounces.<\/p>\n

\u201cThe industrial demand side is growing a lot,\u201d he said. \u2018I like to say that industrial demand provides a rising steady floor under the silver price, and when investment demand kicks in, that\u2019s the wild card that helps to create these rallies and these spikes in the silver price. That\u2019s what you really want to be exposed to.\u2019 <\/p>\n<\/div>\n

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Silver\u2019s growing role in the energy transition <\/h3>\n

Looking further out, Krauth said solar will be a driving force behind increasing industrial demand for silver. At the start of 2023, the Silver Institute predicted that demand from photovoltaics would reach 161 million ounces for the year, but in a revision in its November 15, Interim Silver Market Review report it indicated solar had accounted for 30 percent of 632 million ounces of industrial demand, equating to 191 million ounces, 30 million more ounces than originally forecast.<\/p>\n

As new solar technologies with greater silver requirements come online, demand is only going to increase, even if sales remain flat.<\/p>\n

\u201cThe most popular incumbent (solar) technology for the last several years has been something called PERC,\u2019 he said. \u2018Next in terms of energy output are TOPCon, which takes 50 percent more silver per panel, and then HJT, which takes up to 150 percent more silver per panel. Four years ago, the two newer technologies that took more silver represented 10 percent of the manufacturing capacity; last year, they already represented 35 percent of manufacturing capacity.\u2019<\/p>\n

Krauth believes the silver industry is at an inflection point \u2014 with new technologies being adopted quickly, demand for the white metal from industrial sources is going to increase dramatically over the next few years, especially against a backdrop of incentives from governments encouraging the installation of new solar capacity.<\/p>\n

\u201cIf we\u2019re talking only three years out, solar will be the world\u2019s largest source of energy. It will surpass coal and natural gas. So really solar is absolutely taking over in many, many places as the cheapest form of new energy to add to your grid,\u201d Krauth remarked.<\/p>\n

In addition to its use in photovoltaics, Krauth drew attention to the possibility of silver replacing platinum-group metals as an anode material in hydrogen fuel cells, which could drive production costs down and potentially be adopted quickly.<\/p>\n

He sees these industrial uses driving silver upward, and said a US$30 price point this year is not out of the question. More dramatically, during VRIC\u2019s silver outlook panel, he suggested its price could climb to over US$300 by 2030.<\/p>\n

When Krauth started his session at VRIC, he remarked that not 30 minutes before, a consortium of silver producers had announced it would be sending a letter to the government of Canada urging that silver be recognized as a critical mineral.<\/p>\n

According to the letter, which was sent on January 31, silver has been left off the list because of a misconception about its availability. It speaks to many of the points Krauth made about the supply of the metal, especially around the energy transition. Being included on the list would allow silver producers to accelerate the development of strategic projects with financial and administrative assistance from the Canadian government.<\/p>\n

The next update for the critical minerals list is expected in the summer of 2024.<\/p>\n<\/div>\n

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Investor takeaway <\/h3>\n

With silver demand set to increase and supply not projected to keep up, plus a more positive macroeconomic environment, a perfect storm could be brewing for the silver market and for investors in the white metal.<\/p>\n

But predictions of silver\u2019s breakout have come before. Investors should keep that in mind when looking for opportunities in the market. There are no guarantees.<\/p>\n<\/div>\n

Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.<\/strong><\/p>\n<\/p>\n

This post appeared first on investingnews.com<\/div>\n","protected":false},"excerpt":{"rendered":"

Since July 2020, the price of an ounce of silver has largely fluctuated between US$20 and US$26 per ounce, with a couple of exceptions. Where is the white metal headed in 2024 and beyond? The use of silver in society dates back more than 5,000 years. First used to make jewelry and coins, it\u2019s found […]<\/p>\n","protected":false},"author":0,"featured_media":796,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-795","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/795","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=795"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/795\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/796"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=795"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=795"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=795"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}