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Global Silver Industrial Demand Forecast to Achieve New High in 2023

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Global Silver Industrial Demand Forecast to Achieve New High in 2023

 

 

 

 

 

Silver Industrial demand is expected to grow 8% to a record 632 million ounces this year. Key drivers behind this performance include investment in photovoltaics, power grid and 5G networks, growth in consumer electronics, and rising vehicle output. These key findings were reported by Philip Newman, Managing Director at Metals Focus, and Sarah Tomlinson, Director of Mine Supply, during the Silver Institute’s Annual Silver Industry Dinner in New York tonight, featuring historical supply and demand statistics and estimates for 2023. Other key highlights from their presentation include:

 

  • Globally, total silver demand is forecast to ease by 10% to reach 1.14 billion ounces in 2023. Gains in industrial applications will be offset by losses in all other key segments. Despite the fall, total demand remains elevated by historical standards, making the 2023 figure the second highest in Metals Focus’ data series.
  • Industrial demand in 2023 will achieve a new annual high. As noted above, key drivers in this growth are being driven by a strong green economy, including investment in photovoltaics (PV), power grids and 5G networks, as well as increased use of automotive electronics and supporting infrastructure. Improvements in (PV) were particularly noticeable as the increase in cell production exceeded silver thrifting, which helped drive electronics and electrical demand higher.
  • Silver jewelry and silverware demand is set to fall by 22% and 47%, respectively, to 182 Moz and 39 Moz this year. For both, losses are led by India, where full-year demand is expected to normalize after a surge in 2022. Excluding India, global jewelry demand is expected to edge slightly higher in 2023, while silverware will fall by a notably smaller 12%.
  • Physical investment in 2023 is projected to fall by 21% to a three-year low of 263 Moz. While most markets have seen weaker volumes, losses have been concentrated in India and Germany. In India, record high local prices both deterred new investor purchases and led to profit taking, resulting in a 46% decline. In Germany, investor sentiment was hit hard by the VAT hike to some silver coins at the start of 2023. US investment has also turned lower, but only modestly, thanks to buoyant safe haven demand following the regional banking crisis. The resilience of the US market helps explain why the global total stays historically high.
  • Exchange-traded products are forecast to record net outflows for the second year in a row. As was the case in 2022, the bulk of year-to-date redemptions reflect continued monetary tightening and its consequential boost to yields, especially in real terms. However, the decline in holdings is expected to be more restrained at 40 Moz in 2023, roughly a third of 2022’s record outflows.
  • In 2023, global mined silver production is expected to fall by 2% year-on-year to 820 Moz, driven by lower output from operations in Mexico and Peru. Production from Mexico is expected to fall by 16 Moz due to the impact of the suspension of operations at Peñasquito in Q2 and Q3 in response to the labor strike. Even so, overall production from primary silver mines will still rise this year, driven by the expected ramp-up at the Juanicipio mine. Output from lead/zinc mines will also increase as Udokan in Russia comes on-stream. A decrease in by-product credits, an increase in sustaining capital spending and inflation of input costs will all lead to double-digit year-on-year growth in AISC.
  • Overall, despite weaker demand and a slight drop in total supply, the global silver market is forecast to see another sizeable physical deficit in 2023, marking the third consecutive year of an annual deficit. At 140 Moz, this will be 45% lower than 2022’s all-time high, but this is still elevated by historical standards. Just as important, Metals Focus believes the deficit will persist in the silver market for the foreseeable future.
  • Metals Focus expects the average silver price to increase by 6% year-on-year to $23.10 this year. Through November 7, prices have grown by 8% year-on-year. Going forward, Metals Focus are firmly in the ‘higher for longer’ camp, as far as US interest rate expectations are concerned. This backdrop is not favorable for zero-yielding assets such as silver. The white metal’s investment appeal will also be hurt by poor confidence in industrial commodities due to a slowing Chinese economy. With this in mind, Metals Focus maintains a cautious outlook for the silver price for now and for much of 2024.

 

 

Silver Supply and Demand Year on Year
Million ounces 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023E 2022 2023E

Supply
Mine Production 845 882 897 900 864 851 837 783 829 837 820 1% -2%
Recycling 179 160 147 146 147 149 148 166 175 179 181 2% 1%
Net Hedging Supply 0 11 2 0 0 0 14 8 0 0 0 na na
Net Official Sector Sales 2 1 1 1 1 1 1 1 2 2 2 13% -4%
Total Supply 1,026 1,054 1,047 1,046 1,012 1,000 1,000 959 1,006 1,018 1,002 1% -2%

Demand
Industrial 460 450 457 489 526 524 523 509 559 584 632 4% 8%
Photography 44 41 38 35 32 31 31 27 28 27 26 -1% -4%
Jewelry 187 193 203 189 196 203 202 151 182 235 182 29% -22%
Silverware 46 53 58 54 59 67 61 31 41 74 39 80% -47%
Net Physical Investment 301 283 309 213 156 166 187 205 274 333 263 21% -21%
Net Hedging Demand 29 0 0 12 1 7 0 0 4 18 0 409% na
Total Demand 1,067 1,021 1,065 992 971 999 1,004 923 1,087 1,270 1,143 17% -10%
Market Balance -41 34 -19 55 40 2 -4 36 -81 -253 -140 212% -45%
Net Investment in ETPs 5 -0 -17 54 7 -21 83 331 65 -126 -40 -294% -68%
Market Balance less ETPs -46 34 -1 1 33 23 -87 -295 -146 -127 -100 -13% -21%
Silver Price (US$/oz, London price) 23.79 19.08 15.68 17.14 17.05 15.71 16.21 20.55 25.14 21.73 23.10 -14% 6%

Source: Metals Focus

 

 

Disclaimer & Copyright. The Silver Institute and Metals Focus

 

We (and where relevant, any identified contributors or co-authors) are the owner or the licensee of all intellectual property rights in this document. This document is protected by copyright laws and treaties around the world. All such rights are reserved. No organization or individual is permitted to reproduce or transmit all or part of this document (including without limitation extracts such as tables and graphs), whether by photocopying or storing in any medium by electronic means or otherwise, without the written permission of The Silver Institute and Metals Focus. In cases where we have provided our document electronically, only the authorized subscriber, in respect of whom an individual user license has been granted, may download a copy of this document. Additional user licenses may be purchased on request.

 

While every effort has been made to ensure the accuracy of the information in this document, the content of this document is provided without any guarantees, conditions, or warranties as to its accuracy, completeness, or reliability. It is not to be construed as a solicitation or an offer to buy or sell precious metals, related products, commodities, securities, or related financial instruments.

 

Posted November 16, 2023

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