Sunday, July 24, 2011

Silver prices expected to continue up

Since the times when the Hunt brothers cornered the silver market near 1980, sending silver briefly to $50 an ounce, metals buyers have watched silver descend to nearly $5 an ounce at times, and now today up into the $35+ range. Much of the silver speculation has to do with gold. Gold is very high and tends to pull up other precious metals such as silver, platinum, palladium etc. but these metals have their own demand-side pressures. Palladium and platinum are used as catalysts and are in high demand. Silver solder is in greater demand now that the RoHS so-called "lead free" initiative is law. This draconian ruling attempts to bureaucratically eliminate lead and a few other materials in certain consumer products - reason, to keep them out of landfills mainly - and yet mostly fails to encourage innovative, safe and responsible use of the many other toxic elements that also end up in the trash. RoHS could have long term consequences that are unforeseen.

Silver is highly biotoxic (it is antibiotic, used to prevent infections in bandages and catheters) and though not very dangerous to humans as we use it, changes the land around any silver mine, where nothing will grow. Silver is an excellent, if not expensive, weed killer. Silver is not the only ground-toxic metal: Copper mines are usually surrounded by large areas of sterile terrain, and there are many others.

Even if the lead free manufacturing world was the reason for silver's high price, wouldn't the descent of silver used in photographic manufacturing offset that demand? You would think so. Kodak owned their own silver mines at one time, and brought in tons of silver daily for their production needs.

Last month Shanghai film doubled the price of their product. This 2X increase, which will be followed by other film makers eventually, brings the cost of their 4x5 material from about 23 cents per sheet wholesale to 45 cents a sheet. That means a retail price of about a dollar per sheet is the lowest price you will soon find for even this cheapest sheet film. There may be older stock on ebay you can get for less, for a while. Shanghai is a state-owned enterprise and being state-owned may have internally inelastic pricing that fluctuates rapidly with material costs.

Companies such as Ilford depend on a lot of silver and at any day when the price is high may be worth more in silver than anything else, and they may also buy silver contracts as a hedge against price fluctuations. Many businesses, such as oil dealers, do this to even out the price as it fluctuates. The trouble comes when prices spike, then it is too tempting to sell the material and take the sometimes big profit, and then go do something else. Such a scenario played out with certain larger oil dealers who sold their oil contracts right after hurricane Katrina, making huge profits, though we do not expect this in the smaller, less intensely greedy photo industry.

Silver and all material prices affect what we do here of course. The Impossible Project is also affected by silver's price, and so is 20X24. Mitigating the cost of silver can be done by using less, which is what Fuji does in their FP series of instant films that make use of the amplification of the DTR process, or by buying low and warehousing, which is what some film makers do today.

When silver spiked three decades ago, a lot of new silver mines opened. The prospect of high profits faded when the price of silver, then a bubble, fell and kept falling. This is still within memory of silver mining companies. Is the current metal price spike a bubble? I doubt it. The value of the dollar, much less than before, is a big factor. As long as world trading of precious metals continues in US dollars, I think we can expect prices to climb, or seem to.

1 comment:

Anonymous said...

I suppose the UK shipping its trash to Ghana might be a factor.