Silver Supply Expected to Decline While Usage Grows, Krebs Says

We have somebody who can give us a sense of what the technicals are underpitting, some of the moves, and what we can expect looking forward. Mitchell Crebs joins US now. He is president and chief executive officer of Core Mining UH. He also is the president of the Silver Institute, which is based in Chicago, Illinois. He's pumping his fist. I expected you to come here like drenched in silver, you know, just dripping from everywhere, but but you're not. You're actually

wearing very little jewelry. Um. So there was a report that you put out today that was looking at the silver industry, and there was good news and there was bad news. So why don't you start with the good news. Yeah? Sure, thanks for having me. The good news for sure is that silver supply for the first time in fourteen years,

actually declined last year, So that's a big deal. Not by a lot, but it's now declining and it's expected to continue to decline, which you know, basic supply and demand fundamental suggests that that's a positive tail wind for silver going forward. It's the fourth year in a row now where we've been in a structural deficit where demand has outstripped supply, So that's another positive i'd say. On the on the demand side, UH, solar panel demand hit an all time high. It was up thirty four percent

last year. UH, and that's a market that we think will continue to grow. You know, silver is very much of a technology, green, clean, renewable energy type of metal. I think a lot of people think of silver as your silverware or your jewelry, which definitely that plays a part, but silver is used in every everything with a light switch, anything with an on and off switch has silver in it.

So it's a very diverse UH demand base. And you know this is this is an interesting point because silver is often thought of as a sister metal to gold, precious metal to kind of buy in times when you're looking for a haven um, and yet it's got a much more prevalent industrial use. Can you give us a sense of how much demand has come from stuff that you actually use versus jewelry and how much that has

increased over time. Yeah, that's changed a lot. It used to be mostly a precious metals, but as electronics have have grown globally, emerging middle classes in places like China and India have have grown in consumption GDP per capita has grown industrial demand electronics demand for silver has grown a lot. It now makes up the majority of demand for silver. Can you give us a sense of where that was, say two decades ago or a decade ago,

It would have been more like a decade ago. Fifteen years ago, thirty five millimeter film was actually the biggest source of demand for silver um. Now so that's gone from like thirty five percent a year down to four percent as we've all gone to you know, digital and that's been all replaced with new uses in the electronics sector, predominantly and solar. So, so give us a sense with the shifting landscape. There was some not so great news in the report that you put out today. Can you

lay that out for us? Yeah, overall demand was down. A lot of that has to do with just slower global economic growth UM which has had an impact and had a negative impact on some of that electronics driven demand. Jewelry demand was down a bit. India was probably one of the biggest stories with some of the currency crackdown that took place there last year. That had a negative effect on silver demand, uh, coming out of out of India.

But the beauty of beauty of having such a diverse demand bass you know, every year you're gonna have some things that are down and and some markets that are that are up. But overall last year it was down a little bit. Yeah. Yeah, Well, I mean as I was thinking as you said this, so global demand is down partly because the economy is slowing, and yet typically when things are slowing, they would people would go into precious metals to sort of offset the risk of a

potential downturn. So it's sort of trying to square those two sides is a little bit hard. And that's the duality of silver. You know, it is highly correlated to gold, So everything that moves gold in terms of safe haven investment risk off. You know a lot of people are looking at precious metals these days, more with these higher valuations in the broader equity markets, UM, expectation of higher of inflation. Those types of things that drive gold definitely

UM have a big impact on on silver. But I always think of silver as having a good it's it's underpinned by all of this good, solid, diverse industrial demand. But what moves silver higher is the investment demand in in times when typically that's more favorable to things like gold. So for something that is so stable and has these sort of competing uh dynamics of affecting its price, why is it down more than twelve percent in the past three weeks. Well, silver is a very volatile metal. It

makes gold look like, uh, you know, looks boring. It makes gold look very boring. Silver goes up and down a lot. It's a small market, it's flashy. So the total demand every year for silver's like a billion ounces. So that's you put today's price on that, that's a fifteen billion dollar global annual market. That's chump change, uh, compared to gold is you know, ten times that size

copper for example, oil you know, much much bigger. So silver gets moved around a lot without you know, a lot of capital and so silver can go up and down. Last year, the price of silver varied between thirteen dollars an ounce and I think twenty one dollars announced, which is huge volatility. So in the last uh last four weeks three weeks, a lot of what we've seen in

silver's not that unusual. Um Us in the in the industry have pretty strong stomachs, and that's why it's so important to be you know, as a mining company like us. It's all about costs. It's all about trying to you know, have a diverse, uh diverse portfolio of operations that have low costs, conservative balance sheet to try and withstand that inherent volatility, especially in silver. So with silver, you were

talking about how supply is expected to be down. Is this because companies and mining companies like your yours, Is they're running out of places to go? Or is it something else? Over the last five years, exploration in our

industry has absolutely plummeted. So peak prices were back in two thousand and eleven when silver hit nearly fifty dollars announced, so to go from fifth almost fifty dollars announced down to think get hit thirteen dollars announced people slash their exploration budgets, so there's no new discoveries, so there's no new projects being built. And at the same time, a lot of the bigger projects are a lot of the

bigger minds the world. They're starting to get to the end of their lives, so those are expected to be mined out and and go away. So you were kind of caught in this perfect storm of a lot of the older minds going away and and not a lot of new minds there to offset that. Where do you think is going to be the biggest new vein discovered? Oh, well, the new the next new deposit. I would probably put my money on Mexico, just because Mexico is the world's

largest silver producing country. There's a lot of metal there, so the odds of finding more usually find more metal where there already is metal found, So I'd bet on Mexico. Peru's the second largest silver producing country. Those would be my bets. But you know the places that haven't had as much exploration historically, Africa UM, even in Asia UM, there's probably more uh large deposits out there that just have not yet u UM gotten on anybody's radar screen.

Mitchell Crebs, thank you so much for joining us. Mitchell Crabs as president and chief executive officer of Core Mining. He's all so the president of the Silver Institute, uh and he is based in Chicago. We're gonna we want to dig into some shares it also are thinking into the red Surprisingly, because the war is over, Verizon did beat out A T and T to buy a straight Path in other words, by five G capabilities for three

point one billion dollars. To understand why everyone's just down on this news, John Butler is here to make sense of it all. John Butler is senior Telecom Services and Equipment Analyst for Bloomberg Intelligence. So John, what do you what? Why? Why is everyone down? Including Straight Path, which is down more Well, that all comes down to price. But this

was interesting in terms of how it all unfolded. I think we'll start at the ten thousand foot level, which is this is a big win for Verizon because their bet on the near future in terms of returning to growth is all on five G. We're mostly on five G, I should say, and A T and T S big bet,

as you know, is on content. They bought Direct TV and they're buying Time Warner both carriers have their eyes set on five G services, which are to put it in perspective, it's the next generation wireless technology, the next evolution. As we moved from two G to three G, we're now at four G LT, which people probably recognize. The next step is five G. It promises to be ten times faster than where we are today. But you need

new spectrum bands to deploy that service. And so the FCC initially licensed a number of bands, including twenty eight and thirty nine Gigga Hurts, and this little unknown company called Straight Path had nation wide licenses for thirty nine Giga Hurts and twenty eight Giga Hurts and some big markets like New York. So suddenly, you know, the carriers woke up to the fact that we're going to need this spectrum potentially down the road, and the bidding war

began for Straight Path. So while we're at the twenty foot level, how did straight Path get that spectrum? Well that's a long story, but basically the backstory behind it is they really, to their credit, understood they skated to where the puck was going, if you will, you know, they understood that there would be a need for these high band spectrum frequencies, because high frequencies don't travel very far and so they never had much value. But they

carry a lot more data than those lower bands. And so the carriers are now building networks a lot closer to you and me, the wireless networks, and they don't need that long haul distance anymore, but they want that

big fat pipe. And so straight Path saw that they bought the licenses from the f c C. And where they came into violation is they squatted on them, as they say, they sat on those licenses and they didn't put them to use, and the f c C came back at them and they find them a hundred million dollars the most of what most of those proceeds, by the way, can be paid from the sale of the spectrum. So they're they're forced to sell the spectrum now. Um,

which is which is how this whole bidding war began. Well, so, so is there going to be a six G? I mean, can you go higher frequency? At this point? Uh? Number one? And number two? Is this sort of really bad news for a T and T because they are going to be behind in the speed wars. Well to the first question, Um, with five G, you can put it over any spec from that's allocated for uh use some wireless communications, so it's not like you have to use the up these

higher frequencies. But again I go back to their these multi lane highways if you will. They're big fat pipes then can carry a lot more data than some of the lower frequencies that we use today for four G, and so therein lies the value there for a T and T. They have options. Actually, you know, Dish owns

a lot of spectrum in the higher frequencies. They own something called the AWS which is not nearly as higher frequency as straight paths, but it's it's pretty good stuff and they could look to Dish to license that potentially. And also I think the FCC is going to auction off some of the bands around the twenty eight and the thirty nine gig hurts in the future, although no dates are set. And so there in lies the uncertainty for a T and T. But they see behind a

curtain that you and I don't. I'm sure they've talked to the f c C and they have a better grasp on their options than we do. So let's get to the price. Because straight path is down more than although to be fair, they are up dramatically on the year, dramatically by four fourth, So it's not you know, this is nothing compared to what we've seen. Why, real quick, why didn't A T and T fight this bid again? I think it goes back to what we were just

talking about. I think they have options outside a straight path, and everything comes at a price. And I think if they look down the road and saw another auction coming, maybe they wanted to keep dry powder for that because three point one bagan is a lot of dough. You know, it's a it's a lot of dough. That is the technical term. And you've heard it from John Butler. Uh, it is a lot of dough three point one billion dollars that Verizon is paying to buy straight paths. Thank

you so much. John Butler is senior Telecom Services and Equipment Analyst for Bloomberg Intelligence, and he joins us in our Bloomberg eleven three oh studios here in New York. We want to take a moment to let you know about something new from Bloomberg. Starting right now, you can use our io s app or our new Google Chrome extension to scan any news story on any website instantly. Revealing relevant news and market data from Bloomberg and other

sources related to companies and people you're reading about. So no matter where you're reading the news, you can bring the power of Bloomberg's news and data with you. It's pretty amazing. Download our io s app or search for the Bloomberg extension on the Chrome Store to try it out. Learn more at Bloomberg dot com slash lens Well. I am honored to bring in Craig Bouchard, who's chairman and chief executive officer of Brady Industries, which is based in Kentucky,

not Chicago. Apologize for miss speaking, Craig, Thank you for for coming first. Before we talk about your one point three billion dollar investment. At first, can you just give us a sense of what Brady Industries is. Well. Brady Industries was created for the purpose of bringing jobs and a great company to the Appellation, to the to the northeast part of Kentucky UM and we're building what will be um the highest quality, lowest cost producer of aluminium

in the United States. So, with this one point three billion dollar investment in uh An Aluminum rolling mill to create more eco friendly and very thin aluminiums that can be used for for example, for making cars. Yes, so you would think of Brady as making the sheet the exterior of automobiles that aluminum, as well as the plate aluminum that would be in the wings of airplanes, in

the interiors of airplanes. And then with an acquisition that we'll be announcing here in a couple of weeks, making ultra high strength parts, lightweights, high high strength parts for the inside of cars and airplanes. So why has there been a plant of this size in the US before? Well, actually, I wouldn't say there hasn't been one before. There hasn't

been one in at least thirty years. So, UM, the competitors, which are all great companies, Arconic, Nobela, Solaris, Constallium, Kaiser, they all have plants, but they're older plants that have had recent new additions to them, but they're they're older facilities. UM, it's hard to say why there hasn't been one because, UM, it's clear that greenfield is where advanced manufacturing is going. It's the it's the only way to create the low

cost producer. UM. And I think in the case of the metals companies, you know, they haven't had lots of capital to spend because of you know, some tough years over the last many years, and so this is an opportunity to kind of change that change the whole mold. Actually, well, you know, some people would say that the reason why companies have created overseas factories because the labor is cheaper, UH and you have to pay people more in the US. Is that what you're finding And how much does that

contribute to the issue. Well, that was a real reason. You know, ten years ago people outsourced a lot to China, Vietnam and other places. But the wage rates in those countries have gone way up in that time period, whereas wage rates in the United States have stagnated and even gone down. Even very skilled labors like exist in the Ashland in the in the Northeast Kentucky area, so the

wage equation has flip flopped. Um, we're going to the place that has an abundance of very skilled labor that's underutilized. It's one of the main reasons that we went to eastern northeastern Kentucky. And so these laborers and just to be clear that this mill UH would create up to a thousand construction jobs and that it would be that these would be more, as you were saying, high skilled jobs that would be better paid. Where where were these

workers employed previously? They were very skilled labors in workers in coal mine. Uh. Big layoffs at companies like A K Steel shut up plant down in that area recently. Those are highly skilled workers. Ashland Oil was a Fortune five company in that area many years ago and left. And you know, it's been a it's been a troubled

twenty years in the appellations. We're about to change it. So, given the fact that it's been about twenty years and that a lot of people talk about brain drain from certain areas that you know, have been in trouble for a while, do you think that there will be a sufficient stock of of qualified employees. So, Lisa, here's a

really good answer to this one. When we announced at the press conference with Governor Bevan, who's, by the way, one of the best governors in the United States, if not the best, um we announced to a crowd of three people under a tent um that um Brady was beginning. We made the whole press release, and we we put our website live at that moment with the press release

on it. In a career section, to click on on the website where any individual could send us their resume, tell us exactly what kind of a advanced manufacturing job they're looking for, um, and get in a queue. Um, it's been ten days. We've had two thousand, two hundred applications already for those five and fifty jops. Well, it seems like there's plenty of demand. Um. The one point three billion dollars, how are you financing that? Yeah, so or financed in the normal Wall Street way, UM, with

banks and investors and strategic investors. UM. Roughly one third of that is equity and roughly two thirds will be debt. That's priced pretty attractively given given our background. So we're happy with how that's gone. Uh. The equity was done, is done in two pieces. One of them has already completed in way over subscribed, the other one coming up shortly. So we're we're headed right down the path to breaking

ground in the first quarter. The eco friendly aluminum that you were talking about, is it typically more expensive than the other the other stuff out there. Well, first, aluminum is the only commodity of all of the medals that is one recyclable, so it's eco friendly from from the start, and of course we're not a smelter, we're a rolling mill, so we're using less carbon in general than, for instance,

the smelting industry, which is heavily heavily energy dependent. Um. Thirdly, we're completely brand new, the best machines in the world, coming in from the very best suppliers. Our emissions are almost nothing for having three million square feet under roof on the Ohio River. So it's a really good This isn't the smoke stacks of our of our prior generation. This is five fifty people walking around with an iPad in their hands. Thank you so much for joining us.

Really interesting Craig Bouchard, chairman and chief executive officer of Brady Industries, based in Kentucky, talking about the one point three billion dollar investment that his company is making in a new aluminum rolling mill that should create up to a thousand construction jobs. Really interesting about the job dynamic. And I do wonder how many other firms are going to follow your your footsteps and really move into some of these areas where you have seen companies move out

and people are unemployed. Well, there's some drama today over in Detroit and Keith noton is going to explain it to us. Keith Noon as the auto editor at large for Bloomberg News located in Detroit, and Keith, we're talking about Ford. Ford shareholders are really angry and they had a call not an actual in person meeting or virtual meeting I suppose, I should say, with the leadership of the company today and it was it was pretty heated. Can you first just lay out what some of the

issues were that these shareholders were so upset about. Well, Lisa, the big issue is the stock. That's what they vented their spleen on today in the Search annual meeting. It's down thirty six percent since Mark Fields became CEO in the summer of he followed, as you might recall, the rock star CEO, Alan Moalley. And although he has generated, you know, really strong profits, the US auto market is

at its peak and starting to head down. So investors are fleeing, uh, the auto stocks for the most part, US auto stocks UM, though Ford has taken it on the chin more than others, and the shareholders are are pretty fed up. So they hit UM executive chairman Bill Ford and Mark Fields with a lot of tough questions

today in this annual meeting. You know, I just just point out in your story you noted that Ford's shares have traded down, traded down by about thirty six percent since Mark Fields took the helm as chief executive officer in July of two fourteen. So what were some of the questions that shareholders wanted to know? Where were they focusing? Yeah, well, they wanted to know essentially what management was going to do about what they called the pathetic performance of the

of their stock. Bill Ford expressed frustration. He's the executive chairman. He's also the great grandson as the founder Henry Ford, and he said, um, people ask him, does the Ford family care about the stock price? And he said the short answer is yes, a lot. Most of our worth is tied up in the company, so you know they want to see the price go up as well. Um Uh. He was faced with these questions, Bill Ford, uh at last year's annual meeting too, and he gave it, you know,

a straight, full throated endorsement of Mark Fields. Um. This time around, he certainly endorsed Mark Fields strategy, but he didn't mention him by name. As he was defending the strategy was which was a subtle difference. That's important because Ford's board this week has been turning up the pressure on the Fields. They scheduled extra time to meet with him to ask him about his strategy for turning things around. So the heat is on Mark Fields at the moment,

and let's talk about what he has done, right. I mean, he's diverted quite a bit of money into the self driving and electric technologies and saying that he's going to invest in the road ahead. Um, he also has been uh, I mean overseeing the company at a time of pretty good growth, as you say, But so what what what could he potentially how could he change? Yeah, so he talks about trying to keep one foot in today and

one foot in tomorrow. You know, the the automotive and transportation industries are going through these really you have huge changes as as driverless cars approach in the next few years in robot taxis. So Mark Fields is investing billions and those new technologies that won't pay off for many, many years. And he really gets no investor credit for doing that, though he says if he doesn't, you know,

the company won't survive the changes that are coming. At the same time, though he's not making as much money on the good old fashioned you know business of selling cars and trucks forwards U you know, adjusted earnings. So in the first quarter, while GM was notching record earnings, GM's making more money off SUVs than Ford. Ford's lineup is aging a bit. They don't have UM at the moment competitive big SUVs. They're coming with a redesigned Linket

Navigator next year. They also aren't present in some key segments like small pickups and UM subcompact SUVs, which they are rectifying that as well, but it's going to take some time. And meanwhile GM is stealing the march. So can you just put this shareholder meeting into perspective. I know you've covered others and you've been covering the auto industry for a long time. I mean, have you ever heard such vitriol at a meeting during a generally positive

time for a company? Well that's the key, Uh, during a positive time for the company. This company last year had pretext earnings of ten point four billion dollars, which was the second best in company has to So no, this, this kind of ire from shareholders is unusual given you know how the company is actually performing. But then again, the stock price is pretty unusual for how the company

is performing as well. The stock is acting as if the company is going out of business, when in fact they're doing pretty well, given fact that the auto market, after seven years of growth, is starting to slow down. I want to get your take on the departure of Chantelle Leonard. She was the executive director of US marketing. She had been at the company for twenty five years,

and was it yesterday? Certainly this week the company announced that she will be leaving to pursue other interests without any more explanation, Um, do you have a better sense of why she left and what this means? Yeah, it's very unusual. She was She was sort of public face of forward marketing in the US. She was always appearing on TV or doing interviews about what the marketing plans were. A week ago, she was in a video on the advertising age who website talking about Ford's strategy for self

driving cars, and then suddenly she up and leaves. I think it's a reflection of how tough things are right now for Ford in its home market. Is it loses market share as a sales decline on a retail basis, sales directly to consumers. Chrysler actually outsold for the last month, which is highly unusual. So you know, it's a time of tumult um and Ford's North American operations, and they just lost a pretty valuable veteran who Automotive News magazine

I had identified as a rising star just two years ago. Well, I'm sure we will be talking more as this unfolds about what Ford does plan to do going forward in order to play kate its shareholders. Keith Noton, thank you so much for joining us. Keith Noton is editor at Large for the Auto Industry for Bloomberg News, coming to us from Detroit. Thanks for listening to the Bloomberg P

and L podcast. You can sub gribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo wits one. Before the podcast, you can always catch us worldwide on Bloomberg Radio.