Digital cameras are all the rage among holidaymakers this year but it's too early to write off traditional film cameras, especially in Asia, analysts say.
Users of digital cameras can watch and edit photos on their computers and do not need film and photographic paper, raising concern in the industry that demand for the important component silver might now flag.
But analysts believe the effect of increased digital camera use has been modest so far. "For the last five or 10 years, people have called in the end of photographic silver. But it's not too sharp because people don't change technologies quickly and the price for digital cameras is still too high for many consumers," said Ross Norman, analyst at TheBullionDesk.com.
"You would have to see a dramatic change in pricing for things to change. At the moment, it's not compelling for people to bin their old cameras. The traditional sector still uses silver in films and on papers, and there is rising demand for reprints."
The precious metal, mostly associated with jewellery, is a key ingredient in photographic film and photo paper and is also used in electronics because of its malleability and high conductivity.
The photographic sector accounts for around 25 per cent of total fabrication demand for silver. Demand for silver-bearing photographic products dropped by four per cent in 2001 to 210.2 million ounces from 219.5 million the year before, according to the Washington-based Silver Institute. However, the use of traditional film in China rose by 30 per cent.
"The big question over the absolute impact is clouded by a negative impact by digital photos in Western countries. But at the same time, there is growing use of film in developing countries, especially in China and India, with growing incomes and falling costs of cameras," said Kamal Naqvi, metals analyst at Macquarie Research.
The number of digital cameras worldwide is expected to double by 2004 while traditional cameras are to increase only by about nine per cent. This would reduce the 2002 estimated gap between 1.15 billion film cameras and 57 million digital ones, US-based Photofinishing News said in a study.
But even if digital cameras swept away the need for silver-based films, the precious metal would still be essential to the photo industry. Camera-makers like Eastman Kodak are promoting prints from digital cameras and online storage on silver halide paper.
Photofinishing News estimated that silver use in photo paper would increase from 39 million ounces in 2000 to 45 million ounces in 2005.
Kodak spokesman James Blamphin in New York said he saw no change in the company's demand for silver now or in the immediate future.
"Demand for film is unaffected by the rise of digital cameras. A long way down the road, that is possible to change but we are not seeing diminished demand for film at the moment," Blamphin told Reuters, adding that demand for photographic paper was steady.
Since the beginning of 1998, silver prices have fallen from over seven dollars per ounce to levels of around $4.80. In the last few months, silver tracked gold and attracted investors who sought a safe haven in the wake of the September 11 attacks and wilting stock markets.
Another major factor moving the silver price has been the demand and supply of its host metals tin, lead and copper, analysts said, adding that the photo industry was not a big driver of the silver price.
"Changes in the photo industry can affect people's sentiment in the speculative market but supply is mainly determined by demand for the host metal rather than silver itself," Norman said.
Naqvi said that photography was the most stable sector out of the three users of silver, with the other two being electronics and the silverware and jewellery industry.
"Electronics are more volatile because of the economic cycle. We've seen strong growth in the 1990s and a collapse in the last few years. Demand for silver for jewellery is quite price sensitive. Especially in India, the biggest user in this area, consumers are very sensitive to price and that causes volatility," he said.
He added the silver price this year was mapped by the fallout in electronics and an improvement in jewellery and he expected all elements of demand to improve with an economic recovery expected to start at the end of the year.
"Silver is losing its current strength as a safe haven but is coming back on demand for the fundamental commodity," he said.