Welcome back to the deep dive. Anyone watching
commodities this year? Well, you know, we have
to talk silver. It's just been on an absolute
tear through 2025. I mean, surging past all expectations,
making massive headlines. Yeah, it really has.
And this isn't just a momentary blip. It feels
like a real fundamental shift in the physical
market. OK, let's unpack this. Our goal today
is to figure out why. Sources are pointing towards
this complex interplay, right? Structural supply
deficits, huge industrial demand, and these crazy
logistical challenges. We want to cut through
the noise, get to the basics of silver's new
reality. And I think that reality starts with
silver's unique dual nature, doesn't it? For
investors, yeah, it's often seen as a safe haven,
maybe follows goal. Traditionally, yes. But for
industry, it's absolutely critical. You said
it, almost 60%, nearly 60 % of silver consumed
in 2025 goes into industrial uses. Wow, 60 %!
So this deep dive, it's really about what happens
when that industrial engine and the investment
side both fire up at exactly the same time. Right.
That's the core conflict, isn't it? So our job
here is to give you a clear, fact -based look,
connecting these big global trends, especially
this huge green energy push, with what's actually
happening on the ground, the stress in the physical
market. OK. So let's start there with that industrial
engine. Where's all this demand coming from?
Why is it picking up speed so, so fast? Well,
the acceleration is pretty staggering, really,
because silver is just indispensable for so many
of these future -facing technologies. We're talking
solar PV, obviously, is the big one, but also
electric vehicles, advanced electronics, 5G infrastructure,
even complex medical devices. Basically, if a
technology needs top -tier electrical and thermal
conductivity, It needs silver. And demand's strong
across the board, but it really feels like solar
is the one just warping the whole picture. It
absolutely is. Solar PV demand for silver, it's
growing consistently over 12 % annually right
now. 12 % year on year. That's huge. It is. Yeah.
And to really get a sense of the scale, just
look at China. They're the powerhouse for solar
manufacturing. In 2024 alone, they expanded their
solar capacity by something like 45%. 45%. In
one year. Yeah. That single year's expansion,
it drove a massive, really measurable chunk of
total global silver consumption. That's such
a critical point, because you hear about the
other side too, the efficiency gains. Manufacturers
are always trying to use less silver per solar
cell, right? Yeah. They're getting better at
it. They are, definitely. And that's important,
that thrifting. But when the whole industry is
expanding by double digits, 45%, like in China's
case, Those efficiency savings, they just get
completely swamped by the sheer volume of new
installations globally. The overall demand curve
just keeps climbing regardless. OK, so massive
industrial pull. But before we jump to supply,
we have to touch on how investment demand makes
this worse. It's not just industry needing silver
to build things. Investors are also soaking up
supply. That's absolutely right. If you look
at the global silver backed ETPs, those exchange
traded products. You have evolved funds. Exactly.
In the first half of 2025, they saw a net inflows
of around 95 million ounces. Now, this is really
crucial for listeners to understand. EDPs let
you invest in silver without handling bars, sure,
but they still need real physical silver locked
away in a vault somewhere to back those shares.
So those 95 million ounces, they're now sitting
in a vault secured. They're not available for
a manufacturer who needs them next Tuesday for
circuit boards or solar panels. Precisely. It
directly shrinks what the industry calls the
mobile silver supply, the stuff that's actually
available for real world use. It's like a double
whammy then. Pressure from industry, pressure
from investors both pulling on the same limited
pool. Exactly. OK, so if industrial demand is
this powerful engine and investment is adding
fuel. Where's the breakdown? Let's pivot to supply
because this is where the structural problems
really seem to be hitting the market hard Here's
where it gets really interesting Yeah, this is
key because the problem isn't really a lack of
wanting to mine more silver with prices high.
It's more fundamental It's a failure of the structure
of silver mining itself. That's a really important
distinction The biggest structural issue as our
sources highlight is that silver is mostly a
byproduct? Think about this. Only around 30 %
of the world's silver comes from primary silver
mines. Mines actually focused on silver. Right,
which means the other 70%, the vast majority,
it's just recovered alongside other metals when
miners are primarily going after gold or copper
or lead or zinc. And that has huge consequences,
doesn't it? Like if silver prices jump 50 percent,
a dedicated silver mine. OK, maybe they try to
boost production. Maybe, yeah, if they can. But
the huge copper mine, where silver is just, you
know, a small bonus, they're only going to increase
output if copper prices make sense. The silver
price surge is almost irrelevant to their main
business decision. Exactly right. That production
structure, it severely limits how quickly global
supply can actually respond just to high silver
prices. It's not linear at all. And you see the
result in the deficit numbers. Let's talk about
that deficit because it really puts this price
surge into context. The market's been in a structural
deficit every single year since 2021. This isn't
just a blip. It's systemic. Supply just hasn't
kept up with demand year after year. And that
shortfall, cumulatively, is now getting close
to 800 million ounces. Wow. just to put that
in perspective, total annual global mine production.
It's somewhere around maybe 850 million ounces
currently. So we've basically burned through
almost an entire year's worth of global mine
supply over the last few years because of these
persistent deficits. That's the scale of it,
yeah. It's a huge hole in available inventory
that you just can't fill quickly. And on top
of that structural byproduct issue, you've got
all the usual mining headaches, right? Chronic
underinvestment in finding and developing new
mines that takes... years, a decade sometime.
Long lead times. Declining ore grades in existing
mines, meaning you have to dig up and process
more rock at higher cost just to get the same
amount of silver out. Plus, tougher environmental
rules. It's like a perfect storm holding back
new supply. It really is. What's fascinating
here is how this fundamental imbalance, these
structural supply issues, crashing against massive
demand, how it actually shows up in the day to
day market mechanics. You can almost, well, you
can see the strain in the market data. You're
talking about things like backwardation, right?
That's a bit technical, but it's a really critical
distress signal people should know about. How
can we simplify that? OK, so backwardation. Basically,
it happens when The spot price, the price for
getting silver delivered right now is higher
than the futures price for delivery say three
or six months down the road. Think of it like.
a sudden local gas shortage. You might be willing
to pay an extra dollar per gallon today just
to fill your tank immediately because you're
where you might not find gas tomorrow at any
price. Got it. So the fact we're seeing persistent
backwardation in silver, that tells you there's
an acute physical shortage. Buyers desperately
need the metal now and are paying a premium for
that immediate access. Exactly. And that pain,
it shows up in other ways, too, like the cost
to borrow physical silver, the lease rates. They've
surged. especially in London, which is a major
physical hub. What does that surge mean? It basically
reflects a queue. A line of industrial buyers,
maybe investors too, all scrambling, fighting
for access to the limited physical bars available
to borrow. It probably also widens the bid ask
spreads too, I imagine. Makes trading more expensive.
Definitely. When market makers get nervous about
whether they can actually find the physical metal
to deliver if someone buys from them, they charge
a bigger risk premium. Makes the market jittery.
more costly to transact. And then there are the
pure logistics you mentioned earlier. Silver
bars, they're heavy, bulky. Yeah, not easy to
move around quickly or cheaply. And this combination
of strong demand in specific places plus tight
inventories in vaults, especially London, you
mentioned it's led to something unusual. Well,
sources are indicating a significant uptick in
using expensive air freight to move silver between
major hubs like between New York and London.
Air freight for silver bars. That sounds incredibly
expensive. Like the financial market version
of overnighting a critical factory part on a
private jet. Pretty much. The cost is huge. But
the fact that someone is willing to pay that
premium for speed tells you everything about
how critical and how short physical supply must
be for certain users right now. Let's just quickly
circle back to that paper versus physical link.
Those ETPs locking up supply. Right. It's crucial
to remember it's often a zero sum game at the
margin. every single ounce bought by an investor
and allocated to back an ETP share in a vault.
That's literally an ounce that cannot be bought
by a solar manufacturer or an EV company that
needs it for production. It's a direct tug of
war between the investment world and the industrial
world fighting over the same shrinking pile of
physical bars. Precisely. Okay, moving on slightly.
We should also recognize these shortages, this
tightness. It isn't perfectly uniform across
the globe, right? Regional demand plays a big
role. Oh, absolutely. Take India. Huge silver
consumer. One of the world's largest. And their
demand is very seasonal spikes around festivals,
wedding seasons. Right. That's seasonal buying.
It drives up local premiums inside India. And
it often literally pulls metal. away from global
hubs like London or New York to satisfy that
specific regional demand, can divert supply streams.
And tying back to the main demand engine China,
their relentless industrial growth, particularly
in solar. Yeah, that 45 percent installation
growth we talked about. That underpins this sort
of baseline level of global consumption that
just isn't going away. It kind of locks in this
scarcity dynamic for the foreseeable future,
doesn't it? It really does. If we connect this
to the bigger picture. given the structural deficit,
given the demand driven by green energy, it strongly
suggests this volatility, this price pressure
isn't just a temporary thing, it's likely to
continue. So the key question for listeners is,
okay. Beyond the headline price, what are the
specific signals you should track? Right. We've
laid out the concepts. Now let's give people
the key indicators to watch. You need to monitor
the physical market's health, not just futures
prices. Exactly. First, I'd say watch those lease
rates that cost to borrow silver. High rates
mean high stress. OK. Lease rates. Number one.
Second, look for that persistent backwardation
in the spot versus futures spread. If spots stay
stubbornly above futures, the market is screaming
immediate scarcity. Got it. Backwardation. Third,
keep an eye on physical inventory levels in the
major approved vaults, like COMEX and LBMA vaults.
Are they drawing down consistently? Inventory
levels, okay. And finally, track those ETF flows
we mentioned. Continued strong inflows mean more
physical metals being taken off the table, essentially.
So lease rates, backwardation, inventory levels,
and ETF inflows, those are the kind of real -time
gauges of the physical market's pulse. Those
are the key ones, yeah. So what does this all
mean? At the end of the day, this big silver
price surge in 2025, it looks like it's fundamentally
a repricing. The market is finally acknowledging
silver's absolutely critical role, especially
in this new green economy. It reflects those
deep structural imbalances we talked about, the
chronic supply deficits hitting that wall of
relentless tech -driven demand growth. Yeah,
and that central conflict we discussed. It's
not going away easily. Manufacturers, yes, they're
getting smarter using less silver per unit. The
thrifting, yeah. But the overall scale of growth
in solar, in EVs, it's just so explosive that
total silver demand keeps climbing anyway, year
after year. Which leads us to the final thought.
Right, so here's the provocative question maybe
for you to think about. How quickly can substitution
technologies, finding other materials, or perhaps
more realistically in the near term, how quickly
can recycling efforts really scale up and become
economically viable? Because until they do, this
structural supply deficit could genuinely start
to impact the pace of the global green energy
transition itself. Silver is essential for it,
and the scarcity seems very real and very structural.
That's a fascinating and slightly worrying thought
to end on connecting the dots between commodity
markets and our big climate goals. OK. Remember,
everyone, this deep dive, it's purely for information
to help you engage in informed research. It's
definitely not investment advice. Please do your
own homework. Absolutely. Do your own due diligence.
Keep an eye on those key indicators we mentioned.
And thank you for diving deep with us today.
We'll catch you next time.