Surging silver prices hurting businesses dependent on the precious metal  Silver prices have surged over 150 percent during the course of the last 12 months. This week, silver futures neared their highest-ever levels as investors scooped up the metal to protect against economic and political instability throughout the globe. The run-up in prices, however, is hurting major users of the metal, according to a recently published report.

Silver has a number of industrial uses that have also contributed to its rise in value. In fact, roughly 75 percent of the world's silver stockpiles is used to make film, jewelry, mirrors, batteries, solar panels and other products, the Wall Street Journal reports. With silver prices soaring, companies have moved to find alternative metals and lock-in hedges against future price increases. The uptick in silver futures is eating into profit margins at a number of businesses.

Eastman Kodak, which reported disappointing quarterly earnings this week, has struggled to grapple with surging prices. "We're raising prices, indexing contracts, hedging and moving as fast as we can with the part of the portfolio that's not silver dependent," affirmed the company's chief executive, Antonio Perez.

Illustrating the monetary pain that Kodak has felt with the run-up in silver prices, for every $1 increase in the per-ounce price of silver, the company loses about $10 to $15 million from its bottom line. Though the company has raised prices and tried to minimize its use of the precious metal, it's had a difficult time keeping up with the metal's seemingly endless upward price trajectory.

On Friday, silver futures settled at $47.52 per troy ounce. The last time silver futures topped $50 an ounce - a level many analysts expect them to break in the coming weeks - occurred over 30 years when the Hunt Brothers tried to corner the market. This price rise, however, is driven primarily by burgeoning demand, leading some analysts to contend silver futures could continue to drive past that critical $50 an ounce threshold.

Mining companies have also been hit by the price jump. U.S. Silver Corp, which operates a number of silver mines in Idaho, promised to sell 500,000 ounces of silver at a price of $27.50 an ounce; that figure represents about one-fifth of the company's planned silver output for the year. However, with prices hovering nearly 100 percent higher, the company had to post more collateral.

"I wouldn't have expected it to be this high, and I don't have any better crystal ball than the next person," said company chief executive Tom Parker. "You can always look into the past and say that's a dumb decision. But at the time, it seemed to be a prudent thing to do."

Nonetheless, U.S. Silver has learned from its mistakes, Parker said, and will not hedge any more of its silver production at the current price.
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  1. It's pretty ironic that once again, in an attempt to manage risk by locking in a price of $27 for future delivery, they have unlimited risk in a major way.

  2. Jewelry businesses are using it to their advantage