Silver Prices Continue to Rise: How Has the Demand for Electrical Silver Changed? [SMM Analysis]

SMM, Oct 30: Driven by multiple policies this year, the demand for silver in the electrical alloy industry has increased compared to last year, with a noticeable improvement in order volume. According to SMM's survey of 19 companies (mainly focusing on silver-based contacts), these companies' silver usage this year is between 1,306.4 mt and 1,403.6 mt. It is estimated that the entire silver-based contact industry might use around 1,700 to 1,900 mt of silver (excluding companies purchasing silver wire and excluding silver sheet). According to industry experts, the entire electrical alloy industry's silver usage was around 2,300 mt last year, and the situation is better this year compared to last year. Although high silver prices have somewhat suppressed demand, silver usage has slightly increased compared to last year, showing some improvement.

Overview of Silver Usage in the Electrical Alloy Industry:
Due to its excellent electrical and thermal conductivity, stable resistance, and oxidation resistance, silver has become an important material in the electrical alloy industry. It is widely used in electrical contact materials, electrical heating alloys, and resistance alloys. Particularly in electrical contact materials, silver forms a sulfide film in the atmosphere, which increases resistance but is easily broken down in electrical contacts, maintaining "metal contact" while reducing resistance. Therefore, such materials are widely used and in large quantities in electrical contact materials. However, due to the high price of silver and the need to improve its anti-sulfidation ability, alloying is often used to improve performance. Common alloying elements include copper, nickel, tin, iron, chromium, tungsten, rare earth elements, and other trace elements. In the past, silver cadmium oxide was widely favored for its excellent performance. However, with the improvement of environmental protection standards, silver tin oxide and silver nickel materials have gradually replaced silver cadmium oxide due to their environmental friendliness and good electrical performance.

Development Overview of the Silver-Based Contact Industry:
With the continuous maturation of the domestic electrical alloy market, the silver-based contact industry has flourished. Domestic companies are gradually replacing foreign electrical contact manufacturers, becoming the main global suppliers of electrical contacts. In recent years, the industry's production and sales have repeatedly achieved good results, with silver usage reaching a historical peak in 2021. This growth was driven by the pandemic abroad, which caused many international producers to shut down, leading to a large number of overseas orders being transferred to domestic companies, rapidly expanding the production of domestic electrical alloy enterprises. As foreign companies resumed operations, overseas orders returned abroad, and the "winter" in the real estate sector gradually took effect, domestic orders declined sharply, bottoming out in 2023, but rebounding this year. This rebound is mainly due to two factors: first, market demand. The strong demand for NEVs, the inventory consumption and order increase driven by the "national subsidy" policy for home appliances, and the development of smart equipment and smart products have boosted the demand for the electrical contact industry. Despite the recent high silver prices causing downstream companies to slow down orders and deliveries and the trend of "cost reduction and efficiency increase" suppressing the amount of silver added, the electrical alloy industry has still grown compared to last year. Second, industry optimization. Due to intensified industry competition in 2023, small and high-cost enterprises in industry-concentrated areas such as Wenzhou and Foshan were eliminated, further consolidating the industry through optimization and integration.