Could the world’s clean energy aspirations be restrained by a single element? That is a pressing concern for investors and others today as China, holding between 60% and 70% of the world’s refined silver supply, readies a new set of export licensing regulations to begin being enforced on January 1. The regulations will restrict those silver exports to large-tier-approved companies, in turn appropriating mainly smaller companies and further straining an existing tight supply chain. The concern was summarized succinctly by Tesla Motor Company CEO Elon Musk: “This is not good. Silver is needed in many industrial processes”
The price action of silver in 2025 has been nothing short of remarkable. Initially beginning the year at around $30 per oz, spot prices went parabolic, rising well over 142% to touch a record high of $83.62 before profit-taking sent prices tumbling back to the mid-$70s. The price action in silver is driven by a combination of sentiment rebalancing and a positive fundamental trend of scarcity, according to analysts, who further explain that margin increases by the Chicago Mercantile Exchange have led to deleveraging among highly leveraged traders, illustrating how vulnerable the market remains despite operating at a paper to physicals ratio of almost 356:1. Physical silver is being transacted at premiums of over 7% in Shanghai, reflecting the intense demand for physical metal and depleted supplies.
The deficit in the supply is not a short-run phenomenon. The Silver Institute states that the demand from the industrial sector reached a record high of 680.5 million ounces of silver in the year 2024. The main consumption drivers are primarily the solar cell industry, battery cars, and high end electronics. Every photovoltaic cell consumes between 15-25 grams of silver. The battery operated car requires up to 50 grams of the metal almost two times the average requirement of any normal car. Estimates suggest that annual solar installations would surpass 500 gigawatts in the next decade. The demand would then account for 250 million ounces of the metal each year. The demand from the industrial sector has outstripped the output from the mines for five successive years. The deficits have ranged between 115–120 million ounces.
The Chinese government’s decision is similar to previous rare earth elements decisions, essentially weaponizing a strategic resource. By limiting exportation, China can ensure that the resource is available within its domestic market. This sets up a global shortage with possible supply chain repercussions within solar energy, electric vehicles, semiconductors, or data centers. In each of these sectors, the availability of silver is irreplaceable due to its high conductivity and reflectivity.
The market dynamics mirror the divergence between physical silver and paper silver. The market in silver futures still fluctuates considerably, whereas the market for physical silver becomes less and less liquid with the passage of time because there are delays in the delivery of metal from vaults in New York, London, and Shanghai. The aboveground stock of silver is dwindling away at a rate that alarms both industry consumers and investors. It was proven right with the onset of the Chinese restrictions with a dramatic squeeze.
The precious metals rally has also contributed to the equity markets. Mining stocks, on the basis of the record-breaking prices seen lately, remain an important part of the S&P 500 surge to new heights. E*Trade’s Morgan Stanley analyst, Chris Larkin, was quoted as saying, “Mining stocks were a big part of the S&P 500’s drive to new highs last week, and they’ve been tracking the record-setting rallies in metals. If gold and silver close out 2025 at record highs, the S&P 500 may have a better chance of doing the same.”
However, the relevance between the stock markets and the prices of precious metals has also come to the fore, with the silver usage pattern giving it an important economic sensitivity apart from the traditional usage as an investment metal. From a metal extraction standpoint, the issue posed by the extraction of metal from ore goes well beyond the extraction of metals from mines. With a large decrease in the concentration of metal in ores and with silver as a by-product of polymetallic ore extraction, it would be difficult to directly relate this to price.
While some respite can come from recycling, metal refining capacity cannot fill this gap. Models from economists on supply shocks in precious metals forecast periodic price movement upward when there are ongoing deficits and geopolitical factors that limit supply. In the silver market, it looks like there is going to be pressure upward due to the rising demand from industrial managers, export regulations, and low supplies, at least until 2026. For industry consumers, however, the calculations might be different, as there might be an essential shift toward locking in long-term contracts, as the industry might be facing one of the most critical commodity squeezes ever.
