Industrial demand for silver rebounds to a new high in
WASHINGTON, DC, Nov. 17, 2021 (GLOBE NEWSWIRE) – Every key area of silver demand is projected to increase in 2021, including a record total for industrial demand, despite ongoing supply chain challenges, reported Philip Newman, managing director at Metals Focus and Adam Webb, Director of Mine Supply, during today’s Silver Institute Interim Silver Market Review webcast which included historical supply and demand statistics and estimates for 2021. The main highlights of the presentation are listed below:
- With every significant component of silver demand expected to rise in 2021, global silver demand is projected to hit 1.29 billion ounces, the first time since 2015 to exceed 1 billion ounces.
- With industrial silver demand recovering from the pandemic, this segment will hit a new high of 524 million ounces (Moz). For some of the key segments, we estimate that photovoltaic demand will increase 13% to over 110 million ounces, a new high that underscores silver’s key role in the green economy. This will also underpin a large part of the forecast increase in the purchase of electrical and electronic equipment by 10%. Finally, the demand for brazing alloys and solders will improve by 10% in 2021, aided by a rebound in the housing and construction sectors, although it will still be below pre-pandemic levels.
- Physical investments are expected to increase 32%, or 64 million ounces year over year, to a six-year high of 263 million ounces in 2021. The strength is borne by the USA and India. Building on solid gains over the past year, demand for US coins and bars is expected to exceed 100 Moz for the first time since 2015. The growth started with the social media buying frenzy before spreading to more traditional silver investors. Indian demand reflects the improved sentiment towards the silver price and a recovering economy. Overall, physical investments in India are expected to nearly triple this year after plummeting in 2020.
- For exchange traded products, total inventory is forecast to increase by 150 million ounces this year. As a result, combined stocks will have increased a dramatic 564 million ounces over the past three years. In 2021 and through November 10, inventories rose 83 million ounces, bringing total global stocks to 1.15 billion ounces, near the record high of 1.21 billion ounces set on February 2 at the height of the social -Media storm had occurred.
- This year the price of silver has built on its 2020 gains and has continued to rise. By November 10th, prices were up 28% year over year. This follows a 27% increase in the annual average price in 2020. The uptrend reflects healthy investor inflows into silver, which due to supportive macroeconomic conditions, particularly persistently abnormally low interest rates, concerns about uncontrolled fiscal expansion and recently growing concerns about rising inflationary pressures. The gold: silver ratio fell to 62 in early February, its lowest level since July 2014. However, it has risen since then and is around 74 in early November. Nevertheless, this is still favorable compared to last year when the ratio averaged 89 . Metals Focus expects the silver price to rise an average of 24% year over year to $ 25.40. This would hit the highest annual average since 2012 at $ 31.15.
- In 2021, silver production is expected to increase by 6% year-on-year to 829 million ounces. This recovery is largely due to the fact that after forced shutdowns in 2020 due to the pandemic, most mines can operate at full production rate year round. The countries where production was hardest hit last year, such as Peru, Mexico and Bolivia, will see the strongest increases. Meanwhile, strong prices for silver and by-product metals this year have improved profitability in the silver mining sector despite rising input costs. Average margins in the industry are currently at their highest level since 2012, and only 5% of the world’s primary silver mines operated at costs above the silver price in the first half of the year.
- Silver jewelry and silverware manufacturing is expected to partially recover from low 2020 totals, increasing 18% and 25%, respectively, to 173 million ounces and 40 million ounces, respectively. Both markets will benefit from a significant upturn in all major countries, particularly India, as the economy and consumer sentiment recovered faster than expected and restrictions ended in time for the all-important wedding and festival season.
- Overall, the silver market is expected to experience a physical deficit in 2021, albeit modest. At 7 Moz, this is the first deficit since 2015.
|Silver supply and demand||year for year|
|Net hedging offer||5||4th||2||1||1||1||1||1||1||1||1||18%||-17%|
|Official Sector Net Sales||12th||–||–||11th||2||–||–||–||fifteen||8th||–||n / A||n / A|
|Net physical investment||273||241||301||283||310||211||154||163||183||199||263||9%||32%|
|Net coverage requirement||–||40||29||–||–||12th||2||8th||–||–||–||n / A||n / A|
|Market balance||-34||31||-30||46||-2||71||68||32||30th||80||-7||165%||n / A|
|Net investment in ETPs||-18||53||5||-0.3||-17||54||7th||-21||83||331||150||298%||-55%|
|Market balance minus ETPs||-fifteen||-22||-35||111||81||85||129||53||-53||-251||-157||373 %||-38%|
|Silver price (US $ / oz, London price)||35.12||31.15||23.79||08/19||15.68||17.14||05/17||15.71||16.21||20.55||25.40||27%||24%|
|Source: Metals Focus|
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