Global silver market in a shockingly dire state. On the supply side, problems continue to increase while consumption grows and will continue to grow with the energy transition. Last but not least, the gold-silver ratio also clearly speaks for the necessity of a recovery.

Energy transition: Silver demand will continue to rise Source: VisualCapitalist.com

No silver, no energy transition It is a fact: Silver is the crucial metal of the energy transition. It is used in cars, trucks, vans, ships, barges, and ferries with hydrogen fuel cells. And in satellites, robotics, AI, and renewable energies such as wind power. There are over 10,000 additional industrial applications (military, aerospace, healthcare, electronics, etc.).

Not to mention solar energy. For every gigawatt (GW) of solar power, 500,000 ounces of silver are consumed. And with each solar panel built as part of the global energy transition, silver is also consumed.

According to the Silver Institute, industrial demand is expected to increase by another 8% in 2023, reaching a record high – and it will continue to do so.

Silver: Supply side causes concern But on the supply side, things are currently in a dire state. Mexico, the leading silver producer, has seen its silver production decline by nearly 25% in the last two years. This is partly due to strikes and protests, but also due to privatization efforts in South America and new mining laws that lead to lower investments in exploration and development.

But the hammer is yet to come: As the world’s leading silver producer, Mexico has averaged 5,600 tons per year in the last decade. Unfortunately, the country’s reserves have now shrunk to only 37,000 tons. If production continues at the current pace, the country’s reserves will be depleted by the end of 2028.

This does not mean that there is not more silver in Mexico’s soil. However, if no one invests in their discovery and exploration, Mexico will soon be left high and dry.

In addition, the silver price is currently too low compared to the sustainable total costs of global silver mining. For many projects, silver production costs now exceed $24 per ounce. These costs are expected to rise even further due to increasing labor and diesel costs.

Silver is too cheap Source: tradingview.com

At $23 per ounce, the silver price is far too cheap compared to the costs that many mining companies have. And compared to gold with a high gold-silver ratio of 88, the undervaluation of silver becomes more than clear.

Conclusion: Silver price has enormous recovery potential If something looks like a duck, walks like a duck, and quacks like a duck, then it is a duck. If something is undervalued in terms of demand, supply problems, and compared to gold, then it is silver. Period. I like silver and silver stocks. Period again.

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