When Elon Musk surpassed Jeff Bezos as the world’s richest man, he joked that he was going to send Bezos a silver medal. But it is actually Elon who needs the silver.
Some commentators have called silver Elon Musk’s “Greatest Weakness.” When a mysterious whale purchased $460 million worth of silver in early 2022, some speculated that it might be Musk. Speaking on behalf of Tesla, Musk said he is considering purchasing silver mines.
So why is Musk so interested in silver, and what does it mean for silver prices?
Silver is an important part of almost every one of Elon’s businesses. Silver has unique properties which make it essential for all kinds of technology.
Most vehicles have required silver. As vehicles become more high-tech, this demand will grow.
Gas and diesel vehicles consume between 15 to 28 grams of silver. In electric vehicles, that number is between 66% to 78% higher at 25 to 50 grams per vehicle.
Automated vehicles need even more silver, so as the automotive industry shifts toward electric and autonomous (driverless) vehicles, demand for silver is set to grow even more.
One of the biggest obstacles to the widespread adoption of electric vehicles is a lack of charging stations. As of November 2022, there are 53,000 charging stations in the United States, still far behind the 145,000 gas stations. While still a big increase over a decade earlier; in 2012 there were a mere 12,000 charging stations; of the 53,000 charging stations in existence today, less than 7,000 are fast charging stations.
The Tesla charging network alone consists of more than 4,000 charging stations worldwide and recently announced plans for a “MegaCharger” that will be used for Tesla trucks.
All of these stations, and especially fast charging stations, require silver. The Biden administration recently proposed providing $174 billion in funding for electric vehicles, including building 500,000 charging stations. All of this will mean even more demand for silver.
In 2016, Tesla acquired SolarCity for $2.6 billion. The company produces and installs solar panels, solar energy storage, and delivery systems, for residential, commercial, and industrial customers. These systems also require large amounts of silver.
An average solar panel uses about 20 grams of silver. An average home needs approximately 20 solar panels to cover its electrical needs. An average small to medium-sized business would require approximately 70 panels. But the industrial demand has the potential to be massive.
Musk chose to make SpaceX’s rockets silver in color, but actual silver has essential uses in spacecraft. For example, lubricants in space need to be chemically stabilized for a zero-gravity environment, and powdered silver is a popular way to do this. Silver is also useful for shielding electronics against high levels of radiation present in space. This is one reason NASA used silver-coated quartz tiles on the exterior of the Magellan spacecraft.
Silver may have other important uses in space exploration. Current research indicates that it is possible to use silver electrocatalysts to recover oxygen from carbon dioxide, helping to further Elon’s vision of putting a man on Mars, a reality. Such technology could be important not only for spacecraft but also for colonies on Mars.
So, what kind of effect will all of this demand have on silver prices? First, let’s consider cars and trucks.
The automotive industry currently uses approximately 55 million ounces of silver per year. That’s over 1,700 tons of silver. There are currently approximately 80 million cars produced per year, meaning the current average silver use per car is approximately 19 grams.
Electric vehicles currently account for less than 10% of total car sales. A full transition to electric vehicles would mean each vehicle would require between 25 and 50 grams of silver, or between 70 and 140 million ounces, or 2000 to 4000 tons per year of silver.
With an average of 19 grams of silver per car, the world’s 1.5 billion cars contain approximately 28,500 tons of silver. With a transition to electric vehicles, that would increase to between 37,500 to 75,000 tons of silver.
Regarding residential solar use, there are currently an estimated 2.3 billion houses. If 10% of those homes install solar systems, it would require approximately 92,000 tons of silver. If 25% go solar, it would take 230,000 tons of silver. If 10% of global businesses go solar, it would require approximately 46,000 tons of additional silver. And if 25% went solar, it would require 115.000 tons of silver!
Currently, annual silver production is estimated at 27,000 tons per year and the total amount of silver aboveground is estimated to be approximately 1,600,000 tons. A widespread transition to electric vehicles and solar power like the one Elon envisions would require at least an additional 175,000 tons of silver. This is a modest estimate, assuming only 10% of homes and businesses go solar.
These estimates don’t take into account other high-tech applications which are much harder to estimate due to limited data.
There are many factors involved, but with demand growing, the current mining flow is not keeping up with this demand, thus, prices will surely rise.
It’s estimated that approximately 75% of the silver on earth has already been mined. Of course, there is silver in space, and Musk wants to mine it– but he’s going to need a lot more silver to get there.
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