Silvers slow rise - Insight

The silver market saw record demand in 2015, with the jewellery, coin and bar, and photovoltaic sectors posting new highs, helping to boost total silver demand to 1.17 billion ounces last year, according to the World Silver Survey 2016, released by the Silver Institute recently.

Globally, silver jewelry fabrication increased for the third consecutive year to post a fresh high at 226.5 million ounces (Moz). This increase was largely achieved on the back of an impressive 16% rise from both India and Thailand, while North America posted a 5% annual increase. These gains were partially offset by a sizable contraction in Chinese jewelry offtake. Total silverware fabrication enjoyed its third successive annual rise to an estimated 62.9Moz, a 10-year high.

The largest component of physical silver demand, industrial applications, which accounted for 50% of total physical silver demand last year, was 4% lower, totaling 588.7 Moz. This drop was largely due to weaker fabrication demand in developing countries and a stagnant global economy. On a regional basis, modest increases in industrial demand were posted in the US and Japan, the second and third largest sources of industrial demand, respectively. Electrical and electronics use declined by 10% last year to 246.7Moz, due to slower economic growth in developing countries and the continued weakness in computer sales.

There were several highlights within the industrial segment. Silver demand for photovoltaic applications rose 23% in 2015 to 77.6Moz, marking the second consecutive year of increases in this sector, driven by strong growth in Chinese solar panel installations. Silver demand for ethylene oxide (EO) grew an impressive 103% to 10.2Moz. Mining analysts GFMS estimate that 137.5Moz of silver resided in EO plants around the world at year-end 2015, equivalent to 16% of last year’s silver mine production.

Silver’s use in brazing alloys and solders fell by 5.0Moz and photography demand slid by 4% last year. The pace of decline in photography slowed considerably, to its lowest rate since 2004, as digital technology in the photography industry approaches maturity.

Global silver mine production growth slowed to 2% in 2015 and reached a record 886.7Moz. The mine production growth was attributable to stronger output in Peru, Argentina, Russia and India, while Canada, Australia and China had lower mine production, with the latter decreasing output by 3% percent. Primary silver mine production grew 5%, and accounted for 30% of global silver mine supply. The overall slowdown in mine production last year is expected to continue.

Primary silver co-product cash costs plus Capex fell by 11% to USD11.74/oz. This drop was driven by weaker local currencies, aggressively lower Capex, and lower fuel prices. The producer silver hedge book grew by 7.8Moz in 2015, as fresh hedging more than offset maturing contracts.

Scrap supply was significantly down by 13% at 146.1Moz, the lowest volume level recorded since 1992 and the fourth consecutive year of decline. Behind the decline were fewer collectors active in the market and some holding back material awaiting higher prices. Government sales of silver were again essentially nonexistent.

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