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Thursday, December 18, 2014
   
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Silver Upholstery the Newest Source of Demand

Articles & Blogs - Silver Commentary

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Since I began writing about silver, one of the first facts which really caught my eye was that there had been more, new silver patents than for any other metal. More patents translates into more, new products and applications – which, in turn, translates into greater demand.


The latest innovation in silver technology to reach the market is silver upholstery fabrics. The Silver Institute has a write-up on this extremely important news for the silver market. A fabric-maker named CF Stinson Company won the 2009 “Gold Award for Healthcare Fabrics” at the NeoCon trade show in Chicago. NeoCon is described as “the world's largest commercial interior trade organization”, meaning this new product has just obtained wide exposure to this massive market.


The product works through integrating silver/zinc “crystals” into the fabric. The silver kills bacteria, while the zinc inhibits the growth of mold. The “slightest moisture on these textiles releases the silver ions”. It is the bacteria which multiply in our perspiration which are the prime means of transmitting bacteria between people – behind only transmission through respiration.


Let's look at the large, specific implications – before moving on to the huge, overall implications for the silver market. Perhaps I'm in error (due to a lack of technical expertise), but it would certainly seem if they can design a silver-bearing “upholstery fabric” that this new product could be potentially used on any/every kind of upholstery current used in seats and furnishings.


The starting point here is the transportation industry. It would be hard to think of any transportation company, in any sector of transportation which would not want to at least consider adopting this new innovation into all of their seating. For passenger travel, even if this product is found to have only modest efficacy, its promotional value cannot be over-estimated.


We need only look at the explosion of “anti-bacterial” household cleaners and similar items to see how attractive this property is to the average consumer. Even after it became public knowledge that these products often have only very limited impact in reducing/eliminating bacterial infection, they remain popular and highly visible on our store shelves.


This selling-point can be expected to have even greater promotional value now that we are being bombarded with warnings of a new “pandemic”. Again, this is a matter of perception versus hard, cold facts – since most pandemic illnesses are in the form of a virus. However, there are certainly no lack of nasty bacteria from which companies would like to protect their customers and employees (remember “flesh-eating bacteria” and “super-bugs”?).


It only takes modest supporting data (demonstrating a reduction in the incidence/transmission of bacterial infections) to make the decision to use this product a “no-brainer” for businesses – since this is (more or less) a one-time expense. The need to “reupholster” seats over time exists whether these companies use silver upholstery, or not.


We can naturally expect a “domino effect” here. First, a few companies will adopt this product into their own seating, for the medicinal and promotional reasons previously mentioned. They will likely quickly be copied by their competitors – not only to take away the promotional advantage from their competitors, but also to guard their own legal liability.


If airline A has silver seats on all its planes and airline B does not, and a passenger on airline B catches some nasty bacterial infection while flying on their plane, it is inevitable that this “negligence” would be the basis for litigation. Keep in mind that the “test” to determine whether liability exists is relatively straightforward. Is the risk of bacterial infection a “reasonably foreseeable” risk? Secondly, is the use of silver seats a “reasonable” precaution to reduce or avoid that risk for their passengers?


Thus, this “domino effect” would first result in the spread of this product through one transportation sector, and then (for the same legal/medical/promotional considerations) it can be expected to spread to other transportation sectors. This represents the “tip of the iceberg” with respect to commercial applications.


For all of the reasons previously mentioned, we can expect this product to have great appeal to all the owners of theaters and sports arenas – and any place with significant numbers of upholstered seats (such as a nearly infinite number of “waiting rooms”).


How long will it be before both corporations and the general public want to see this product in the seats of automobiles? Do you think that parents with young children (and people in general) would be interested in silver upholstery in their homes?


Naturally, in the real world price is a factor of primary importance. The good news for “silver bulls” (and bad news for the bullion-banks who are “short” half a billion ounces of silver) is that most of these new, anti-bacterial applications for silver only use trace amounts.


Regular readers will be familiar with a previously mentioned (and similar) application for silver: its use in polyester sportswear (see “Silver's WIDE Range of Uses Continues to Push Demand Higher”). This one application now consumes 1,200 tons of silver per year – but that silver is spread out into 50 million tons of silver polyester.


I had previously noted that this meant that silver represented only 1/20,000th of the total product (by weight). However, in reviewing that data I discovered that I had based that calculation on the wrong number for total demand. As others can verify through pulling out their calculators, the correct ratio is less than 1/40,000th .


It appears that the ratios are similar with respect to silver upholstery, although not enough data is included to reach a firm conclusion. The “crystals” which are merged into these fabrics contain only 2.5% silver. Therefore, fabric which contains tiny crystals – which only contain 2.5% silver - would only require relatively tiny quantities of silver for each square foot of material.


What this means in economic terms is that demand for such silver material is highly “inelastic” with respect to the price of silver. What this means in market terms is that the price of silver can soar to many multiples of its current price – while having only minimal effect on these facets of demand (or none at all).


This is a characteristic possessed by few other commodities on the planet. Even oil has only limited “price inelasticity”. Naturally, other sources of silver demand are more sensitive to price. However, investor demand can be expected to be similarly “inelastic” when investors can see that industrial demand can be relied upon to (at worst) remain strong – and more likely it will continue to soar.


The potential number of antibacterial applications is nearly infinite: roughly equal to the number of products in our society. If we can have “silverware” made of 100% silver, then we can also obviously create “anti-bacterial utensils” which only contain trace-amounts of silver. I won't fill up space by simply listing dozens of others of equally obvious potential applications.


We can also never forget how these new sources of industrial demand affect the supply of silver. How high would the price of silver have to go, before people would begin to try to recycle the 1/40,000th part of silver in polyester sportswear? It's hard to attach a firm number to this (without also making assumptions about inflation and other factors), but the fundamentals suggest that a rise to a triple-digit price would not make silver uneconomical, thus $100+/oz for silver appears to be simply a matter of “when”, not “if”.


As a reminder to those who are new to the silver market, in the Earth's crust, there is roughly 17 times as much silver as gold. Through nearly 5,000 years of history, the silver/gold price ratio has averaged 15:1. Today, despite estimates that as much as 90% of global silver stockpiles have been consumed, the ratio sits at greater than 60:1. A 15:1 ratio today implies a price of silver of over $70/oz.


Yes, markets can remain irrational for a long time (especially manipulated markets). However, they don't remain “irrational” forever. And the longer that price-fixing keeps silver at an artificial price – far below its real value – the more rapidly that silver will be over-consumed. It is this simple reality that guarantees to investors that the longer they have to wait before silver begins its real “bull market” the more radically we can expect the price to spike, once price-fixing fails (as it has on every occasion, throughout history).

 

As for when this takes place, with both gold and silver having quadrupled in price this decade, it is obvious that this price-fixing is already failing and on the verge of collapse. This is the expected consequence of the Manipulators running out of both gold and silver to short/dump onto the market. Given these parameters, I am firmly convinced that this wait will be both relatively short, and extremely lucrative for those with the vision to take advantage of this opportunity.

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