Silver’s Critical Role in the Clean Energy Transition

Theme and Background

This chapter focuses on silver’s dual role in the global energy transition—serving both as an industrial metal and a precious metal. The report notes that in 2023, silver demand exceeded supply for the third consecutive year, with industrial demand rising to 55% of total consumption. As of May 27, 2024, silver prices have surged 32.93%, driven primarily by expectations of U.S. interest rate cuts, geopolitical turmoil in the Middle East, and gold purchases by the People’s Bank of China. The author argues that silver is rebounding from its 2023 slump, with future trends hinging on interest rate declines, a recovery in physical investment, and growth in industrial demand.

Core Thesis

The author’s core investment argument is: Silver is at an inflection point of structural supply-demand imbalance, where structural growth in industrial demand (especially from photovoltaics, electric vehicles, and AI) will surpass traditional investment demand, driving sustained price strength. Counterintuitive judgments include:

• Although silver usage per solar cell has dropped from 521 mg in 2009 to 111 mg (a trend of “silver reduction”), the explosive growth in installed capacity will fully offset this effect, with photovoltaic silver demand projected to rise 170% by 2030.
• Electric vehicles (EVs) use 25–50 grams of silver per unit, higher than conventional internal combustion engine vehicles (15–28 grams), and autonomous driving will further increase silver usage per vehicle.
• In 2023, ETF holdings declined by approximately 50 million ounces (over 6% of total holdings), yet this did not prevent silver prices from rising, indicating strong fundamentals in the physical market.

Key Arguments and Data

1. Widening Supply-Demand Imbalance

• In 2023, silver demand exceeded supply for the third consecutive year, with industrial demand reaching a record high of 654 million ounces (55% of the total 1.2 billion ounce market), up 11% year-over-year from 2022.
• Industrial demand is expected to grow another 9% in 2024, setting a new record.

2. Three Major Growth Drivers

Sector	Key Data	Growth Logic
Photovoltaics	Photovoltaic silver use in 2023: 142 million ounces (13.8% of global silver consumption, up from 5% in 2014); silver per cell: 111 mg (521 mg in 2009); global solar industry expected to grow 32% in 2024 (BloombergNEF)	Explosive capacity growth offsets silver reduction; new panel technologies may reverse the reduction trend
Electric Vehicles	Global EV sales expected to exceed 17 million units in 2024; U.S. EV sales surpassed 1 million units in 2023 (up 52% YoY); IEA predicts one in two vehicles globally will be electric by 2035	Each BEV uses 25–50 grams of silver, higher than ICE vehicles (15–28 grams); hybrids use 18–34 grams; autonomous driving will significantly increase silver usage
Artificial Intelligence	Involves transportation, nanotechnology, biotechnology, healthcare, wearables, computing, and data center energy storage	Increased demand for high-conductivity materials in data centers and AI hardware

3. Total Silver Usage in the Automotive Industry

• Current annual silver usage in the automotive industry is approximately 80 million ounces, projected to rise to 90 million ounces by 2025.
• Safety features (airbags, automatic braking, driver alertness systems) and stricter environmental standards continue to increase silver usage per vehicle.

4. Changes in Investment Demand

• In 2023, silver ETFs reduced holdings by approximately 50 million ounces (over 6% of total holdings), but physical investment (bars, coins) and industrial demand filled the gap.
• The author expects ETF buying to recover in 2024, and with interest rate cut expectations, investment demand will turn into a positive contributor.

Companies/Assets Involved

The report does not mention specific company names but clearly favors the following asset classes:

• Silver Mining Companies: The report states that “supply-demand dynamics support silver mining companies,” implying that mining stocks will benefit from rising silver prices.
• Physical Silver (Bars, Coins): A recovery in physical investment demand is one of the price-supporting factors.
• Silver ETFs: Expected to shift from net outflows to net inflows in 2024, acting as a price catalyst.

Investment Implications

1. Go Long on Silver and Silver Mining Stocks: The persistent supply-demand gap (three consecutive years of supply deficit), structural growth in industrial demand (photovoltaics + EVs + AI), and a recovery in investment demand amid interest rate cut expectations point to clear upside for silver prices.

2. Monitor Silver Consumption Changes in the Photovoltaic and EV Supply Chains: Despite the trend of silver reduction, explosive growth in installed capacity and production will dominate demand. New panel technologies (e.g., types with higher silver loading) could become an upside surprise factor.

3. Beware of Short-Term Risks: The significant ETF sell-off in 2023 highlights fragile investment sentiment. If interest rate cut expectations fail to materialize or an economic recession deepens, silver prices could be suppressed; however, strong physical fundamentals provide downside protection.

4. Consider Silver’s Catch-Up Potential Relative to Gold: Silver’s 2024 gain of 32.93% has already begun to catch up with gold. Historical patterns suggest that silver often outperforms gold in the mid-to-late stages of a gold bull market.

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Theme and Background

This chapter focuses on the incremental demand for silver in two emerging sectors—electric vehicles (EVs) and artificial intelligence (AI)—while analyzing the long-term stagnation on the supply side. The report argues that the contradiction between structural demand growth and rigid supply shortages is the core logic driving silver prices higher over the long term.

Core Thesis

The author believes that silver’s industrial demand is shifting from traditional sectors to high-growth new energy and technology fields, while supply has seen zero or even negative growth for several consecutive years. The supply-demand gap is expected to widen by a further 17% in 2024. The counterintuitive point is that despite silver prices rising by 32.93%, mining company valuations remain at historical lows (2020–2024 range), and the market has yet to fully price in the persistence of supply shortages.

Key Arguments and Data

1. Electric Vehicle (EV) Demand

• Each EV uses 25–50 grams of silver, higher than traditional internal combustion engine vehicles (ICE).
• Charging infrastructure represents an additional source of demand: the U.S. National Renewable Energy Laboratory (NREL) estimates that the U.S. will need 28 million EV charging ports by 2030.
• The number of global EV models has grown 15% year-over-year, totaling nearly 600 models, with governments driving the transition through decarbonization targets and emission regulations.

2. Artificial Intelligence (AI) and Data Centers

• In 2022, data centers (mostly non-AI) accounted for 1.2% of global electricity demand (approximately 340 TWh).
• By 2026, data center electricity demand is expected to double to 700 TWh (2.2% of global demand); by 2030, it could quadruple to 1,400 TWh (4.1% of global demand).
• Due to its lowest electrical resistivity, silver is a key material in electronic components such as switches, transformers, relays, and capacitors, and is also used in semiconductors, wiring harnesses, sensors, LIDAR, wearable medical devices, and more.

3. Supply-Side Stagnation

• Mine production fell by 1% in 2023 and is expected to decline by another 1% in 2024 to 823 million ounces, the lowest since 2020.
• Recycled supply is expected to remain flat, leading to a 1% decline in total supply.
• Only 28.3% of silver mines are primary silver mines; the rest are by-products of other metals, making them vulnerable to disruptions in primary mine production.

Supply-Demand Gap Comparison (2023–2024)

Indicator	2023	2024 (Forecast)	Change
Mine Production	Down 1%	Down another 1% to 823M oz	Continued contraction
Industrial Demand	Record high	Up 9% to new record	Accelerating growth
Market Deficit	Existing	Widening by 17%	Intensifying supply-demand tension
Exchange Inventories (since Feb 2021)	Down ~480M oz	Continuing to decline	Persistent inventory drawdown

Companies/Assets Involved

• Silver Mining Companies (Overall): The author is bullish. The report cites RBC Capital Markets data (Figure 8), showing that silver miner valuations from 2020–2024 are at historical lows, suggesting current stock prices do not reflect the earnings improvement driven by supply shortages and demand growth.
• EV Supply Chain Companies: Indirectly positive. Manufacturers of charging stations, batteries, and electronic components will increase silver procurement.
• AI/Data Center Companies: Indirectly positive. Demand for silver from servers, semiconductors, and power infrastructure will grow alongside computing capacity expansion.

Investment Implications

1. Go long on physical silver and mining stocks: With supply declining for three consecutive years and industrial demand growing 9%, the deficit is set to widen by 17% in 2024. Inventories have already been depleted by 480 million ounces, and the supply-demand imbalance will push prices higher.

2. Focus on undervalued mining companies: Miner valuations are at their lowest since 2020. If silver prices continue to rise, earnings leverage will be significantly above historical averages, presenting valuation recovery opportunities.

3. Watch for supply disruption risks: Only 28.3% of silver is from primary mines. Production cuts or strikes at major mines (copper, lead, zinc) could further compress supply and exacerbate the shortage.