Silver's Structural Supply Deficit and the Long-Term Bull Case for 2025 and Beyond

The silver market is entering a pivotal phase, driven by a confluence of structural supply constraints and surging industrial demand. As the green energy transition accelerates and technological innovation intensifies, silver's role as a critical enabler of modern infrastructure is cementing its position as a strategic commodity. This analysis examines the widening structural deficit, the industrial forces fueling demand, and the investment re-rating that positions silver as a compelling long-term asset.

Structural Supply Deficit: A Deepening Chasm

The global silver market has been in a structural deficit for four consecutive years, with the 2023 deficit reaching 142.1 million ounces and the cumulative shortfall from 2021 to 2025 exceeding 820 million ounces. This deficit is not a temporary anomaly but a systemic imbalance rooted in supply-side rigidity. Mine production has contracted at a 0.9% compound annual growth rate since 2020, hampered by declining ore grades, lengthy project development timelines, and the fact that 72% of silver is produced as a byproduct of other metals, limiting responsiveness to price signals according to industry analysis. Recycling, while reaching a 13-year high in 2023, remains insufficient to offset demand growth as data shows.

The deficit has intensified in 2025, with Q3 data showing physical market tightness in key hubs like London and Mumbai, where spot prices traded at multi-decade premiums. Analysts project the deficit will widen further as industrial consumption outpaces supply, with some forecasts suggesting prices could reach $62/oz by Q3 2026 as market reports indicate.

Industrial Demand: The Green and Digital Revolution

Industrial demand for silver remains the primary driver of the bull case, with solar photovoltaics (PV), electric vehicles (EVs), and artificial intelligence (AI) leading the charge.

1. Solar Energy: The solar industry consumed 195.7 million ounces of silver in Q3 2025, accounting for 19% of global demand. While technological advancements like copper-cored silver pastes and busbar-less cell designs have reduced silver usage per watt, the sheer scale of solar capacity additions is outpacing efficiency gains. By 2030, solar demand is projected to grow at a compound annual rate of 15–20%, driven by the shift to high-efficiency TOPCon and heterojunction solar panels, which require more silver per gigawatt.

2. Electric Vehicles and Grid Electrification: EVs require 25–50 grams of silver per unit compared to 15–28 grams in internal combustion vehicles according to market analysis. Beyond the vehicles themselves, the electrification of transportation infrastructure-charging stations, grid upgrades, and smart grids-demands silver for electrical conductivity and durability. With global EV adoption accelerating, particularly in China, Europe, and North America, this sector is expected to contribute meaningfully to silver demand growth.

3. AI and Advanced Electronics: Silver's unparalleled electrical conductivity makes it indispensable in 5G networks, IoT devices, and AI-driven data centers. The 5G IoT market alone is projected to reach $17.68 billion by 2030, growing at a 47.6% CAGR, with silver demand from this sector potentially tripling by 2030. AI's computational demands further amplify silver's role in high-performance components, with the AI economy expected to contribute $15.7 trillion globally by 2030 as industry projections show.

Investment Re-Rating: A Market in Transition

The structural deficit and industrial demand surge have catalyzed a re-rating of silver as an investment asset. By mid-2025, silver prices had surged 25% year-to-date, breaking above $35/oz and reaching $38. This re-rating is supported by three key factors:

1. Undervaluation Relative to Gold: The gold-silver ratio currently stands at 90–100:1, well above its historical average of 65:1, suggesting silver is undervalued relative to gold. This discrepancy creates a strong case for a price correction as investors reallocate capital to the more attractively priced metal.

2. ETF and ETP Inflows: Silver-backed ETFs, such as the iShares Silver Trust (SLV) and Aberdeen Physical Silver Shares ETF (SIVR), have seen record inflows. Global ETP inflows reached 95 million ounces in the first half of 2025, as market data shows, democratizing access to silver and amplifying institutional and retail participation.

1. Long-Term Market Projections: The global silver industry is projected to grow from $21.8 billion in 2025 to $30.02 billion by 2035, reflecting a 3.25% CAGR. This growth is underpinned by persistent industrial demand and the inability of supply to keep pace, creating a self-reinforcing cycle of scarcity and price appreciation.

Conclusion: A Strategic Commodity in a New Era

Silver's structural supply deficit, coupled with its indispensable role in the green and digital revolutions, positions it as a unique investment opportunity. The market's inability to scale production quickly, combined with industrial demand growth outpacing efficiency gains, ensures that scarcity will remain a defining feature of the silver market for years to come. As investors increasingly recognize silver's dual role as both an industrial input and a strategic hedge, the re-rating of this undervalued asset is likely to accelerate. For those with a long-term horizon, silver offers a compelling case of scarcity-driven value creation.