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Facts ‘n’ Figures: Global silver mine production drops for first time in 14 years
* We knew this was going to happen. While we had the lowest price of silver in 2015, there was at the same time, all the carryover development from the boom at $49 silver when everyone spent big $ on developing projects and resources. The results was increasing production each year peaking in 2016. Now were left with decreasing projects coming on line, thus demand for lesser resources should be positive for the price of silver *CM

POSTED BY: JOHN CUMMING MAY 26, 2017

The following is a release by the Silver Institute upon the publication of the World Silver Survey 2017, produced on its behalf by the GFMS team at Thomson Reuters.

Global silver mine production in 2016 recorded its first decline since 2002, largely the result of lower by-product output from the lead-zinc and gold sectors. Coupled with less silver scrap supply to the market, which posted its lowest level since 1996, as well as a contraction in producer hedging, total silver supply decreased by 32.6 million oz. in 2016. Moreover, new highs were recorded for silver’s use in the photovoltaic and ethylene oxide sectors, both growing and significant industrial applications for silver.

Silver supply

Global silver mine production declined by 0.6% in 2016 to a total of 885.8 million ounces. A large proportion of the drop was attributable to the lead-zinc and gold sectors, where by-product silver production dipped by a combined 15.9 million oz. silver. On a regional basis, Mexico registered the largest drop in production last year, followed by Australia and Argentina, yet those losses were partially offset by gains in Central and South America and Asia. Even so, Mexico was again the world’s largest silver producing country, followed by Peru, China, Chile and Russia.

Primary silver mine production grew by 1% to realize 30% of total silver mine output last year. Lead-zinc mines contributed 35% of 2016 by-product output, followed by copper mines at 23% and gold mining at 12%.

Silver scrap supply fell to 139.7 million oz. silver in 2016, a level not seen since 1996, despite higher silver prices. The contraction was largely driven by lower Asian flows, due in part to lower industrial fabrication volumes. Scrap supply from the industrialized world was also muted, as partial jumps in flows from the U.K. and Europe in general, offset falls in North America and Japan.

In other areas of silver supply, GFMS reports that again government sales of silver were essentially non-existent last year, while in 2016, delta-adjusted silver hedging by producers contracted by 18.4 million oz.

Investment

The annual average silver price posted an impressive 9.3% increase in 2016, its first rise since 2011. Assisting the price was last year’s supply and demand scenario, which led to another annual silver market deficit, the largest in three years and the third-largest on record, reaching 147.5 million oz. silver. The average price last year, at US$17.14 per oz., registered 28% higher than 2007, when the silver price averaged US$13.38 per oz.

Identifiable investment, which consists of physical bar investment, coins & medals purchases, and additions or drawdowns to exchange-traded products (ETP) holdings, retreated 7% from the level achieved in 2015 to 253.8 million oz. silver last year. To put this in a broader context, this level of investment was still 23% higher than the average over the decade preceding 2015. Holdings in global ETPs increased robustly by 47 million oz. last year, posting an all-time high in October.

Silver coin and medals fabrication fell by 9% in 2016, from its record high in 2015, to 123.2 million oz. Even so, coin and medal fabrication was still at its second highest level this century. Silver bar investment fell by 46%, mainly the result of lacklustre demand in India due to a combination of higher prices, destocking and government measures on unaccounted wealth. Notably, increases in bar demand occurred in Germany and the United Kingdom.

Fabrication demand

Total physical demand fell by 11% in 2016 to 1,027.8 million oz., pulled lower by weaker offtake for jewelry, silverware and retail investment. Industrial applications, the largest component of physical silver demand, accounted for 55% of total physical silver demand last year, and were marginally lower by just 1%, reaching 561.9 million oz. silver.
The U.S. experienced another healthy rise in this sector, the second in succession, jumping 9% over 2015 volumes, while Japan posted a 6% rise in silver industrial fabrication. Elsewhere, demand was dragged lower by softer economic conditions with declines in China, Africa, South America and Europe.

Silver demand for photovoltaic applications posted a noteworthy 34% rise to reach 76.6 million oz. silver. This growth was the strongest since 2010 and driven by a 49% increase in global solar panel installations. Silver’s use in the ethylene oxide industry grew at the margin, yet it was a record performance for the sector supported by a 6% rise in global capacity.

Silver jewelry fabrication declined 9% to 207 million oz. from the record level of 228.3 million oz. set in 2015. The loss was led by China and India, where jewellery offtake was materially weaker due to higher silver prices and a build-up of stocks. Demand was stronger however in Indonesia, Vietnam, and the U.S., which had a 12% increase in jewelry fabrication, reaching 16.1 million oz. silver last year. Globally, silverware declined by 17% to 52.1 million oz. with higher silver prices accounting for the bulk of the fall.

Silver’s use in electrical and electronic applications, as well as its use in brazing alloys, fell last year, victims of a still sluggish global economy. Photographic demand fell by just 3% in 2016 to 45.2 million oz. silver, representing the lowest percentage decline since 2004, potentially indicating that the bulk of structural change in the photography market is over and that current fabrication volumes may be largely sustainable.

— Founded in 1971 and based in Washington, D.C., the Silver Institute is an international industry association. Its members include leading silver producers, refiners, manufacturers and dealers of silver investment products. Visit www.silverinstitute.org for more information and to download and purchase World Silver Survey 2017.


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