Silver demand up in 2019, while mine production falls

London (Apr 23)  International silver demand was buoyed in 2019 by a 12% increase in investment demand, as retail and institutional investors focused their attention on the long-term investment appeal.

This is according to the Silver Institute’s ‘World Silver Survey 2020’, which states that total demand for the precious metal increased from 988.3-million ounces in 2018, to 991.8-million ounces in 2019.

Investment demand grew by 12% to 186.1-million ounces in 2019, making it the largest yearly growth since 2015 with notable gains of 25% in Europe, 9% in the US and 5% in India, thereby leading to the increase.

The survey points to institutional investment faring better than retail demand in 2019, with exchange-traded product holdings at 728.9-million ounces at year-end, up by 13%, achieving the largest yearly rise since 2010.

In addition, money-managers’ net positions in Comex futures went from being short over much of 2018 to consistently positive in the second half of 2019. Silver demand for coins and medals experienced a 13% increase in over 2018, rising to 97.9-million ounces, while bar demand remained at 88.2-million ounces.

Combined, these were the key drivers for the 15% intra-year rise in the silver price to a three-year high of $19.65 during September 2019. The 2019 yearly average silver price of $16.21 was 3% higher than the 2018 average price.

International silver demand increased in 2019 to 991.8-million ounces, an increase of 0.4%, as higher net-physical investment was offset by lower jewellery and silverware demand. Industrial fabrication was nearly unchanged from 2018, at 510.9-million ounces.

The survey notes that although the escalating trade war between China and the US weighed on industrial offtake last year, losses were broadly mitigated by favourable structural changes, such as vehicle electrification and a rebound in the key field of photovoltaics. Photovoltaic demand registered a 7% increase in offtake, rising to its second highest yearly level, while silver’s use in brazing alloys rose 1%.

In terms of jewellery, silver declined by 1%, to 201.3-million ounces, primarily owing to soft demand in India and China. In contrast, Thailand achieved a 13% increase in 2019 and growth was also registered in Indonesia, Japan and Italy.

Silverware fell by 9% in 2019, almost entirely as a result of lower demand from India.

In terms of silver mining performance, international mine production decreased for the fourth consecutive year in 2019 by 1.3% to 836.5-million ounces, primarily a result of declining grades at several large primary silver mines and disruption-related losses at some major silver producers.

Primary silver production declined by 3.8% in 2019 to 240-million ounces.

On a country basis, the largest production declines were led by Peru, followed by Mexico and Indonesia, which were partially offset by gains in Argentina, Australia and the US. Internationally, Mexico was the leading silver producer in 2019, followed by Peru, China, Australia and Russia.

Total recycling volumes increased in 2019 by 1.3%, primarily as a result of an increase in industrial and jewellery and silverware recycling.

Further, an increase in hedging activity in the second half of 2019, at 15.7-million ounces, saw the international hedge book increase for the first time since 2014. Net supply from the official sector fell in 2019 to 1-million ounces.

As far as 2020 is concerned, The Silver Institute report that the uncertainties presented by the Covid-19 pandemic make forecasting silver market conditions over the rest of the year challenging.

The organisation says that with the difficulties currently facing the global economy, key areas of silver demand, including industrial fabrication and jewellery and silverware offtake, are anticipated to fall, solely as a result of the global pandemic.

“Mine supply is expected to continue its decline given the temporary shutdown of mining operations in several significant silver mining countries in early 2020.”

In addition, silver physical investment is forecast to extend its gains in 2020, with a projected 16% rise to a five-year high as investors rotate out of equities in search of safe haven vehicles. “Metals focus expects silver to outperform gold later this year, which could see it test $19.00 again before year-end,” the Silver Institutes statement concluded.

MiningWeekly

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