Silver Market Enters New Era as Industrial Demand Drives Historic Supply Deficit

A fundamental transformation is reshaping the silver market, creating what industry insiders call a “new paradigm” as unprecedented industrial demand collides with constrained supply. According to the World Silver Survey 2024, the market faced a staggering supply deficit of 184.3 million ounces in 2023—one of the largest shortfalls on record—with projections indicating this gap will widen by another 17% in 2024.

This structural imbalance has propelled silver prices upward by 134% since 2016, from $14 to nearly $33 per ounce, with many industry executives now expecting the $35-40 range to become the new normal.

“Silver came off a fairly long bottom that was $18-22. And only recently, just a little over a year ago, we broke out the bound range $22 to over $30. Our belief that in a year’s time, you’ll probably be talking something like $35,” said Kootenay Silver CEO James McDonald.

At the heart of this transformation is silver’s dual identity. While investors have traditionally viewed it as a monetary metal and inflation hedge, silver’s industrial applications are now driving unprecedented demand growth. The metal’s superior electrical conductivity makes it irreplaceable in advanced technologies powering the global electrification revolution.

Nowhere is this more evident than in renewable energy. Photovoltaic silver demand has quadrupled from 59.6 million ounces in 2015 to an estimated 232 million ounces in 2024, reflecting silver’s essential role in solar panel efficiency. This surge represents just one component of industrial consumption that now includes electric vehicles, 5G infrastructure, and advanced semiconductor manufacturing.

The critical difference in today’s market is the price-inelastic nature of this industrial demand. Unlike investment flows that might respond negatively to higher prices, manufacturers need silver regardless of cost, creating a higher price floor for the metal.

Meanwhile, new mine development faces increasing regulatory hurdles, extended permitting timelines, and technical challenges. The result is what analysts describe as a “skinny” project pipeline with limited new supply additions expected in the coming years.

This market dynamic is proving highly favorable for established silver producers with strong operational credentials. Silvercorp Metals exemplifies this advantage, achieving all-in sustaining costs of just over $12 per ounce—creating extraordinary margins at current silver prices around $35.

“Our view is we’ve been able to be profitable at much lower silver prices, but now that we’ve hit into this band, we’re trading in that $35-36 range,” noted Silvercorp President Lon Shaver. The company is leveraging these robust margins to fund growth initiatives, including construction of a new mine in Ecuador targeted to begin production in 2027.

In Mexico’s prolific silver districts, Kootenay Silver has established itself as another notable player, recently announcing a maiden resource of 54 million ounces at its Columba project with exceptional grades of 284 grams per tonne silver. The company’s strategy focuses on advancing assets to preliminary economic assessment stage before potential sales to major mining companies.

The geological setting at Columba is particularly advantageous, with mineralization confirmed to 540 meters depth within an old volcanic caldera. Kootenay has also benefited from improving regulatory conditions in Mexico, with McDonald noting, “The direction is the temperature, if you will, has changed. It’s a big improvement.”

Technological innovation is creating additional opportunities within the sector. Companies processing tailings and historical mineral stockpiles benefit from significantly lower operational costs compared to traditional mining—often $1-2 per tonne versus $30-200 per tonne for underground mining.

Cerro de Pasco Resources exemplifies this approach with its Quiulacocha tailings project in Peru, which targets reprocessing of historical tailings containing an estimated 423 million ounces of silver equivalent. The company’s submersible pump extraction system eliminates traditional mining methods while providing environmental remediation benefits.

Recent drilling at Quiulacocha confirmed average grades of 5.5 oz/ton silver equivalent, including valuable metals like gallium and indium—strategic elements increasingly important in technology applications and currently dominated by Chinese production.

The sector’s strong fundamentals have attracted significant capital investment. Notable financing activities include partnerships like Outcrop Silver’s arrangement with Silver Mines for its Kramer Hills project, which surrounds the historic Shaherald oxide gold mine. These transactions demonstrate multiple pathways for value creation within the silver sector while reflecting broader investor confidence.

Looking ahead, industry analysts point to silver’s potential for continued outperformance. The gold-silver ratio, historically averaging around 16:1, remains elevated—suggesting significant catch-up potential for silver prices relative to gold during precious metal bull markets.

This convergence of constrained supply, accelerating industrial demand, and technological innovation has created what many consider the most favorable silver market conditions in decades, with both investment and industrial catalysts supporting a sustained higher price environment.