While the precious metal is commonly associated with jewelry, flatware and coins, over half of all silver is used to make cars, computers, photovoltaic power systems and ethylene oxide-based synthetic fibers like polyester. An increase in the industrial demand for silver would indicate an increase in global industrial activity, especially as it pertains to the vital autos sector, the report said.
The expected recovery is coming after two consecutive years of slowing demand following a considerable decline in 2009 sparked by the last recession. That was followed by a quick rebound in 2010, but last year, demand for silver fell 4 percent, and this year it is expected to see a nearly 6 percent drop.
Despite the current uncertainties in the U.S. economy and struggling euro zone economies, global gross domestic product growth is expected to be higher next year. The International Monetary Fund predicts that China's and India's output will help lift the global economy by 2.4 percent next year, up from the estimated 2.1 percent for 2012. U.S. GDP is expected to drop slightly next year, and it remains below 2 percent.
“By 2014, a somewhat more sustained recovery is envisaged, although for many key economies this will continue to fall short of levels achieved over the past decade,” the report said.
Silver used in photography and silverware has seen structural declines -- a loss that isn’t likely to be recovered -- but new products have offset these losses to a modest extent.
Apple Inc.’s (Nasdaq: AAPL) first-generation iPad and iPhone 3GS are examples; these two products are predicted to consume about 400,000 ounces of silver in their production cycles this year, according to Alex Stewart International, a U.K.-based analytical and inspections services company. Other brands of tablet computers will use as much as an additional 190,000 ounces.
“Some products did not exist until just a few years ago, so although their individual silver content is modest, they nonetheless represent silver demand that simply did not exist before,” said the report.
Silver demand has been boosted this year by increased use of the metal in plants that produce ethylene oxide, in which silver is used as a catalyst for the manufacture of ethylene glycol, which is used for the manufacture of polyester products. The rise helped offset the decline seen in the use of silver for photovoltaic systems.
In New York trading, silver for December delivery was up 10 cents to $33 an ounce. The metal almost touched $50 an ounce in April 2011 and was trading below $10 in December 2008 amid the last recession.