Photographic demand for silver has fallen 70% from its peak. What could possibly fill that gap...?

Back in the good old days, a physical silver trader's dream would be to land a photographic company as a customer.

Polaroid, Kodak, Fuji and many more were on this list of prospects. This industry was a tremendous behemoth in the silver market.

In fact Kodak was technically in the silver refining business. They had created operations to capture scrap silver as well to lower their costs of production for their film. One spin-off from the recent reorganization of the company is Rochester Silver Works out of New York State. There were also many production sites that grew up in their vicinity. I'm certain it was the same at the manufacturing plants of their competitors as well.

In 1999 the photographic market was to hit its peak of silver production. In the United States alone according to the US Geological Survey, this market consumed over 93,000,000 ounces. Globally the photographic industry needed 267 million ounces that year, around one silver ounce in every four traded worldwide. So photography carried real buying power as an industry. But the turn of the century was the beginning of the end.

Since 1999 photographic demand for silver has contracted almost 70% to date. I think the reason is obvious to anyone over the age of 23. A child of 10 years old in 1999 would surely recall the popularity of film today. They would also recall that, in the years of their coming-of-age, photography became dominated by the electronic market. More specifically the use of digital cameras was to be the demise of silver consumption in this industry.

Recently, statistics point to a dropping demand for digital cameras. But this does not mean any growth in the old film industry. Instead it indicates growth in smart phone replacing digital camera use.

Still, photographic film remains a big consumer in the silver marketplace. The medical sector uses film primarily for x-rays, and it has held up very well. But don't hold your breath hoping for a resurgence in this sector either. As the new technology becomes cheaper, more and more hospitals and other users of x-ray film will convert to the digital world, too.

So what does this tell us today? Silver consumption by the photographic market, which at its height represented over 25% of fabrication demand, is still in decline. We have seen roughly a 12 to 15% annual decline over the last 10 years. It is projected that this year's photographic market demand will top out at 81.8 million ounces for global consumption according to CPM Group.

In the year 2003 photographic consumption worldwide represented roughly a little over 32% of total end-product fabrication demand in silver. Now it is down to only 9%. Fabrication demand is currently at about 81% of consumption of annual production.

Meanwhile in the period from 2003 to 2013 annual silver production grew 23%. Will a further decline in photographic demand or the complete disappearance of this once great consumer be a tremendous factor on the silver price? I say it's doubtful. But the fundamentals do mean something, and to understand what has saved the price of silver from the loss of demand from the photographic market we have to look to the new industries that have filled the void.

Next we'll look at the changes in the silver marketplace over the last 10 years, and what they mean to silver users and the silver price. Somebody is buying silver, and investors in this market need to know why - and who they are - to better position ourselves for the next price move.