When will industry press the panic button?

Looking at the rise in silver prices this last year, and being aware of the crucial role silver plays in modern manufacturing, I am wondering where the threshold price is for industry where they will decide that for their own survival they will have to buy up large amounts of silver and stockpile it to ensure continuity of existence for their companies? It must be getting close I would imagine.

It is my guess that the public are keeping the prices up now by buying physical and paper silver as they realise that they have to get in before the price rises further, surely industry must be getting close to the same conclusion with regards the physical side of things. Something is pushing the price of silver up despite all of the heavyweight downward manipulation... Perhaps physical is now driving the price of paper rather than the other way around?

 

Considering the amount of silver required for most of it's applications in industry, I don't think the panic button is being hit quite yet.

Silver could go 10x what it currently is now and it won't have that dramatic an impact on end pricing of goods, it's used in that small an amount for each application.

This is actually good for stackers, because it means if the prices move upward sharply, industry demand is unlikely to pull back. The extra cost will simply be absorbed into the final product and considering the amounts used, that will be minimal extra cost.

I think the panic moment will come when industry cannot source metal and any cost.

But before that period, we'll likely see hoarding of product first and big price spiking.

Silver is NOT a short term investment. Whilst you can speculate on the price moves day to day and make a few bob, it's the long term trend that will be where your real money is made.

A dollar here, a dollar there on spot - who gives a toss?

Look at the ten year chart and project that well ahead.

If the estimates on above ground stock are accurate however, the next decade will be a very interesting one indeed for silver.

But as to exactly when? No one will really know until it happens. I am sure there's stockpiles and reserves out there though, waiting for the market to pick up enough that it's worth putting out there for sale and profit.

 

Gotta agree with Auspm here.But the time where all the planets line up and silver boldly goes where silvers never been before ( that sounds familiar ?) gets closer every year!

 

Businesses have been buying (stockpiling) and hedging in increasing quantities since around the $23 mark. (Remember when that seemed a high price?) Many users have long term direct deals with suppliers and refineries - and these transactions don't appear on the market radar.

For many industrial uses only tiny amounts of silver are used (e.g. silver solder in mobiles and PCs). It's not a really big deal to them when the price doubles.

It's the equivalent of when (for us) the price of paper clips double. Have you even awoken with a look of startled terror from a nightmare that the paperclip spot price doubled overnight?

(Umm, if you have, I don't REALLY want to hear about it!!)

 

Brilliant analogy.

Does anyone know anyone in an industry that does use silver for manufacturing?

 

I don't agree with this at all.

Your gut instinct may think that this analogy works, but you have to remember how many paper clips do we each use? ... not very many , I agree. However...

...now think about a company who uses small amounts of silver but in tens of thousands or millions of devices in a year. That translates into much larger costs than any single individual would incur.


There is no company that says, "big deal, one of our supplies suddenly costs us twice as much." Again we are consumers who use very small quantities of a given product individually however, we need to remember that these companies use quantities of resources that dwarf what individual consumers would use.

Even keeping with the paper clips. A company that makes them has very slim margins. If the raw material price doubled overnight the company would be in serious trouble. (even though the price of a single paper clip going from .01 to .02 cents would be trivial to the consumer.)

IMO, any cost increases, regardless of how much or how little actually gets used in a product, is a significant increase to the producer because of the quantity of products that they produce.

 

I think you are missing the point though. Yes it is a big cost to the producer, but that cost is transferred to their customers. And to all of those companies that buy the product, it is not a big cost. Provided each individual product uses the commodity in only a small amount, and their competitior's products also use it, then it is a small price rise accross the board. If those conditions are not true, and it is a significant increase in production cost per unit and the consumers won't accept - then re-engineering may be necessary

 

You're assuming that the manufacturers are able to pass on cost increases. Many are not due to contractual arrangements.

The paper clip analogy is probably bettered by a printing paper analogy. Cost per sheet small, but use lots of sheets. I know I purchase more printing paper if a price rise is on the way.

 

It's all about the production lines. It is not so much the cost of the product as the timing and inventory. The kind of industry panic that the original poster is referring to would be a situation where low silver inventories threaten to halt production lines. A halted production line is the worst case situation. This is the situation that is implied when people talk about "silver at any price."

So all your arguments about paper clips and sheets of paper are kind of irrelevant because you still assume that you can get your paper clip at any price. It is not the high unit PRICE that will have an effect on the bottom line of the company it is the physical SHORTAGE of the metal threatening to close down their business! Smart companies would be already stockpiling. There probably would have to be some catalysing event, whether real or perceived, that would start off the spike - say JPM is forced to cover its shorts. (eg when Rhodium went to $10k/ounce on troubles in South Africa)

 

I read an article once on silver use in RFID chips. There is a possible alternative to silver use in RFID chips but silver would need to rise above 50 dollars for it to look like becoming viable. So its likely that replacements for silver use will be found in some instances but at what price is the question.

 

There's something like 2000 and rising patents for industrial silver uses.. FYI...
The medical industry is recognising the value of silver in treating bacterial infection. Due to the massive overuse of the current antibiotics it is rendering them ineffective over time. Ionic silver is a magnificent bacterial growth inhibitor.