Silver’s Strength Is That It Is Neither Strategic Nor Critical
Recently there have been calls by members of the silver market to have governments declare silver a strategic or critical metal. Such a move would be detrimental to the silver market, to producers, users, investors, and others. Efforts to have silver labeled a strategic or critical metal are misguided on a number of levels.
- Silver is neither a strategic nor a critical metal. It simply does not have the qualities that make metals or minerals either strategic or critical. Silver simply does not meet the qualifications to be considered strategic or critical.
- Silver’s strength lies in the very fact that it has none of the characteristics of a strategic or critical metal. If silver were a strategic or critical metal, as these terms are defined by governments and other authorities, silver would not be used in as many applications and ways as it is, and its market would be burdened with many nuances that would limit silver’s attractiveness both to fabricators that do or might in the future use silver in their products and processes, and to investors. All of this and more would be bad for silver producers, markets, and prices.
- The last thing that the silver mining industry, silver users, investors, and the overall silver market needs are the governmental burdens, regulations, oversight, and involvement in the silver market that would come with the metal being declared a strategic or critical metal.
Strategic and critical metals defined
Before discussing (a) why silver is not a strategic or a critical metal, and (b) why pushing governments to declare it one is a misguided policy idea, let us define what makes a metal either strategic or critical.
Different governments have differing definitions of what makes a metal or mineral strategic or critical, but they all come down to being important to economic activity or defense, being relatively scarcely distributed in mineable deposits in a few countries, and having those mineable deposits located primarily in countries that could be considered adversaries.
For example, the U.S. Defense Department defines strategic minerals as those that support military and strategic activities and critical minerals as those that support essential civilian industry; are not found or produced in the United States in quantities to meet that nation’s needs; and are found and produced in a relatively small number of countries, many of which may be considered potential adversaries to the United States at times.
Metals such as cobalt, tantalum, and the platinum group of metals meet the criteria for being declared strategic or critical metals. They are produced in a limited number of countries, many of which may represent unstable, uncertain, or hostile nations. They are produced in relatively small volumes. In the case of cobalt and tantalum, there are no large above-ground inventories of refined metal that might be drawn upon if newly mined supplies were disrupted. They are crucial materials for a number of military and civilian manufactured products and applications.
Importantly, the classification of a metal or mineral as being critical gives the government the rights and authority to assert strict measures controlling the conservation and distribution of such metals.
Silver Does Not Pass Muster
Silver mine reserves and resources are found in more than a hundred countries around the world. Some of the largest deposits yet discovered have been in the United States, with Mexico and Canada also holding vast reserves and resources. Silver was mined in at least 76 countries as of 2023.
The Current Issue
Over the past several years governments and others have become concerned about resource availability in a world characterized by increased nationalism including resource nationalism at the same time as sharply reduced intergovernmental cooperation and politically motivated disruptions in international trade and commerce. This coupled with new technologies emerging that require relatively scarcely produced metals has led to governments re-establishing national strategic and critical metals policies and stockpiles. These existed from World War One through the Cold War, but were largely dismantled by many governments and militaries (although not the U.S., Chinese, or some other governments) during the period from the middle of the 1990s through around 2006.
As governments came up with strategic and critical metals policies and lists over the past 18 years, silver has not been on most if not all of these governments’ lists of metals to worry about.
That makes sense given the availability of mineable silver in many countries, the globally established silver mining industry, the large above ground inventories of refined silver around 5.5 billion ounces, the larger amount of silver in jewelry, silverware, and decorative objects available for recovery and refining, and the lack of critical and strategic uses for silver.
The chart and table on the following pages, from the US Geological Survey, highlight the reality that there are enormous mineable reserves of silver in numerous countries around the world, including the three North American producers. Economically mineable silver reserves were equivalent to more than 23 years of production at current rates as of 2022, according to the USGS data, which are considered the most complete and accurate in the world. (The USGS table is in metric tonnes. The chart is in millions of troy ounces.)
Silver is geologically available in many places and quantities, but the production of it is subject to many factors including the economic viability of individual deposits, government regulations and permitting issues, taxation policies, social and political risk, and more.
Some silver mining companies feel left out, and think that if silver were declared a strategic or critical metal investors might find their shares more attractive. They now are lobbying governments to declare silver a strategic or critical metal.
That would be a bad move for silver. Being a strategic or critical metal means that governments pay extra attention to your market, and assume controls related to the production, processing, use, and ownership of the metal. Governments will intervene in production and fabrication demand trends. They will impose a range of regulations, including prohibiting production developments if foreign direct investments are involved and export restrictions or prohibitions that reduce the potential revenues and profits of mine developments and operations. Governments can and do limit the supply of strategic and critical metals to domestic industry as well. Overall, being a strategic or critical metal brings with it government involvement, intervention, regulations, oversight, etc. which would be counter-productive and lead to sub-economic decisions skewing the silver market.
Summary
The strength of the silver market is its relative abundance, along with its electrical, chemical, and physical attributes. The silver market and silver price benefit from silver not being a strategic or critical metal.
The fact that there are ample supplies of silver allows the solar photovoltaic panel industry and other manufacturers to use silver in cost effective applications. That is a powerful positive for silver that should be emphasized by the silver mining industry and its promotional agencies.
Calls to have silver declared a strategic or critical metal are misguided and short-sighted. The government oversight and regulations that come with such designations would be negative for silver miners, silver-using industries, investors, and the overall silver market. No one involved in silver should want governments to have the rights and authority to control silver production and distribution, limit and allocate silver use in manufactured products, and restrict investment demand.
This CPM Group Market Commentary is sponsored Silvercorp, one of the premier silver mining companies in the world. Silvercorp sees silver and silver mining equities as excellent investments, and wants to help investors to invest in silver and silver mining shares based on rational, fact-based reasons and expectations.
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Addendum: A Bit Of History Of Silver Used In Military Applications
Prior to the 1960s the US Department of Defense did not have more than a working inventory of silver. There was no strategic stockpile of silver; no silver was held in the National Defense Stockpile, a program created before the U.S. entered World War One that existed under various names and structures from that time to the present.
The Defense Department and its predecessor the War Department did not see silver as a strategic metal and had access to silver held by the U.S. Treasury.
The Treasury bought silver under various Silver Purchase Acts from the 1870s into the 1960s. As a result of offering above-market prices (at or below 85 cents per ounce for much of those decades), the Treasury had built up a stockpile of up to 3.3 BILLION ounces of silver by 1942. This silver was available to the military if it needed it.
During World War 2 the two major uses of silver by the government were:
- The Lend Lease act, in which Treasury lent around 1.4 billion ounces to the allied governments in India, other Asian, Middle Eastern, and European governments to help prop up their wartime economies and monetary systems at a time when silver was still used in monetary purposes. The metal remained in refined bullion form. Most if not all of this was repaid to the Treasury by 1948.
- Photography, reconnaissance photography was new in World War 2. It used a lot of silver at that time.
After the war the military still relied on the Treasury to supply silver as needed, holding only small working inventories.
Silver In The Manhattan Project
In recent months silver promoters and True Believers have been pointing out on the internet that the Manhattan Project that developed the atomic and nuclear bombs during World War Two used around 146 million ounces of silver in their research magnets. They have stated that only silver could do that job.
In fact, the Manhattan Project, begun in 1942, asked for copper for use in its development research. The U.S. government declined to supply that much copper, saying it was needed for the war effort. However, the government said, there were around 3 billion ounces of silver at the U.S. Treasury which could be used as a substitute for copper in the Manhattan Project research. It was not that only silver would work and that silver had to be used. The reality was that the researchers wanted copper but could not get it because of its use in military arms and ordnance, so they substituted silver.[1]
[1] https://www.osti.gov/opennet/manhattan-project-history/Places/OakRidge/oak-ridge-y12-silver.html#:~:text=The%20Silver%20Program%20provided%20silver,available%20due%20to%20war%20demands.
Since World War Two
1950s: After World War Two silver use in private sector general photography, electronics, cooling, refrigeration, air conditioning, silverware, jewelry, and other applications grew rapidly and soon was greater than the amount of silver being refined from mine production and scrapped end-of-life silver-bearing materials. As a result, the market price rose above the Treasury’s sale price, around 85 cents, and silver-using companies began buying silver from the Treasury.
This along with other currency market developments made it clear that Silver Certificates (U.S. dollar bills redeemable for silver at $1.00 per ounce) and silver in circulating currency had to be withdrawn and replaced before silver prices reached the $1.00 Silver Certificate redemption price and the $1.29 price at which silver could profitably, albeit illegally, recovered from refined silver circulating currencies.
1960s: The Treasury was removing silver from its currency system starting in the early 1960s, completing the program in June 1968. Silver was used to back Silver Certificates and as metal in coinage.
When Treasury ended this program in June 1968 it transferred the remaining 165 million ounces of inventories to the U.S. Defense Department’s National Defense Strategic Stockpile (NDS), with Administration and Congressional approval.
The Defense Department did not want this metal, but Congress and the Administration made Defense take it. The decision to move this remaining silver to the National Defense Stockpile was made under pressure from domestic mining interests. Those same forces had Congress further mandate that DoD could only sell the silver if it could assure Congress that its sales were not having a negative effect on silver prices.
So the metal sat there in the Strategic Stockpile, earmarked for sale, from the mid-1960s into subsequent decades, despite the DoD stating annually that it wanted to dispose of, sell, the silver.
The Defense Department wrote, repeatedly, “the probable wartime supply exceeds projected U.S. requirements.”
1970s: Some 25.5 million ounces of this silver was removed in 1970, returned to the Treasury and Mint for use in commemorative coins. This left 139.5 million ounces of silver in the NDS. That silver stayed there until 1985.
The stockpile silver was held by the Treasury for the Defense Department, incidentally. There were 49.4 million ounces at the U.S. Mint’s West Point facility and 90.1 million ounces at the San Francisco Mint.
1980s: After the analysts at CPM helped the U.S. Mint create the Gold Eagle, we began working with the U.S. Mint and members of Congress to create a Silver Eagle. Our proposal, ultimately adopted into the enabling legislation, was that the Mint would use the DoD National Defense Stockpile (NDS) silver until it was used up, and then buy silver in the market to make the coins.
One point we made in proposing the Silver Eagle was that since the coins would be produced and sold only in volumes to meet investor demand, using the stockpile silver to make these coins would not and could not be claimed to be ‘interfering’ with the silver bullion market and price.
Another part of our argument for the Silver Eagle, embodied in Senator McClure’s speech introducing the enabling legislation, was that by selling the NDS silver in coin form to (largely) U.S. citizens, there would be a stock of silver in coin form available in a national emergency, ‘a stockpile walking around in citizens’ pockets.’
2000 onward: The last of the stockpile silver was used in 2000 – 2001, and the Mint commenced a purchase program, which was ‘revised’ by the George W. Bush administration under direction of Vice President Dick Cheney in a way that cost the Mint more to buy the silver. Changes to those procedures, reversals of the more costly approach, were made later in the 2000s.
Now
The silver market has experienced a number of silver promoters pushing the idea that there are massive amounts of silver used in missiles, far more than CPM estimates. These promoters push the idea that so many missiles being used around the world are using in nonrecyclable ways enormous volumes of silver. They claim that Tomahawk missiles each have 482 or 500 ounces of silver in them, for example.
The amount of silver used in military equipment is highly classified, but informed sources report that a Tomahawk missile actually has around 10 – 15 ounces of silver in it, mostly in solder and an ignition battery. Not 482 to 500 ounces. The smaller missiles used extensively in Ukraine, the Middle East, and elsewhere each are said to have less than one ounce of silver in it, again in solder and ignition batteries. The actual use of silver in missiles is measured in hundreds of thousands of ounces over the past 40 years.
Torpedoes use silver batteries. They are continually recycled and replaced with fresh batteries. In searching for the last reported use of a torpedo by the U.S. Navy, it appears that was during World War 2.
CPM produced a video on this topic posted on Youtube on Friday 8 December 2023, Pearl Harbor Day.
https://www.youtube.com/watch?v=rniBAo17ZhI
Silver use in photography is minimal now, with most reconnaissance employing digital imaging. Some silver is used in producing high quality prints of digital images for use in Congressional testimony and other presentations.
Silver is not used in bullets, contrary to another silver promoter claim.
Overall military use probably < 50 MM oz per year, maybe closer to 10 – 20 MM oz. per year
The table below shows that silver use in Tomahawk missiles that have been fired over the past 40 years totals around 32,000 ounces, with another 60,000 ounces estimated to be in the 4,000 Tomahawk missiles the U.S. military has in its stockpiles. Another 4,000 or fewer Tomahawks are estimated to be in stockpiles held by other militaries to which the U.S. has sold them, possibly representing another 60,000 ounces of silver. The number of similarly sized missiles stockpiled by other countries may hold another 60,000 ounces or less. This would put the total silver used or existing in stockpiled Tomahawk grade missiles to be around 212,000 ounces.
Even using the 482-ounce guesstimate tossed about by promoters, the total would be on the order of 7 million ounces, over four decades. This is not enough to make a large impact on silver market supplies or prices.
