Silver Demand, Silver Industrial Demand, Silver Institute: In a groundbreaking revelation, the global silver industrial demand is poised to achieve an unprecedented high in 2023, soaring by 8% to an astonishing 632 million ounces. This surge is underlined by substantial investments in photovoltaics, power grids, 5G networks, and a flourishing consumer electronics and vehicle output industry.
Key points highlighted during the Silver Institute’s Annual Silver Industry Dinner in New York, by Philip Newman, Managing Director at Metals Focus, and Sarah Tomlinson, Director of Mine Supply, revealed a forecasted 10% decrease in total silver demand globally, reaching 1.14 billion ounces in 2023. Despite this decline, industrial demand is set to hit a new annual high, driven by the robust growth of the green economy.
While silver jewelry and silverware demand are anticipated to decline, largely influenced by India, global industrial applications are expected to compensate for these losses. Physical investment, however, is projected to reach a three-year low of 263 million ounces in 2023, impacted by various factors including market sentiment shifts in India and Germany.
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Exchange-traded products are forecasted to experience net outflows for the second consecutive year, primarily attributed to monetary tightening. Yet, the decline is expected to be more moderate compared to the previous year. Mined silver production is projected to fall by 2%, with Mexico and Peru contributing to the decline due to various operational challenges.
Despite a slight drop in total supply and weaker demand, the global silver market is poised for another substantial physical deficit in 2023, marking the third consecutive year of annual deficit. Although lower than the previous year, the deficit remains historically elevated, emphasizing the persistent scarcity in the silver market.
Metals Focus predicts a 6% year-on-year increase in the average silver price, reaching $23.10 in 2023. The firm maintains a cautious outlook for the silver market throughout 2024, citing challenges posed by US interest rate expectations and concerns about a slowing Chinese economy affecting confidence in industrial commodities.
In 2023, there is an anticipated 2% year-on-year decline in global mined silver production, with the output expected to reach 820 Moz. This decrease is primarily attributed to lower production levels in Mexico and Peru. The Mexican output is projected to decrease by 16 Moz, a consequence of the suspension of operations at Peñasquito during Q2 and Q3 in response to a labor strike.
Despite this setback, an overall rise in production from primary silver mines is expected, driven by the anticipated increase in activity at the Juanicipio mine. Additionally, the output from lead/zinc mines is set to grow with the commencement of operations at Udokan in Russia. Factors such as a reduction in by-product credits, an uptick in sustaining capital spending, and inflation in input costs are expected to contribute to double-digit year-on-year growth in AISC.
Despite facing weaker demand and a slight reduction in total supply, the global silver market is projected to encounter another substantial physical deficit in 2023, marking the third consecutive year of an annual deficit. At 140 Moz, this deficit is 45% lower than the all-time high reached in 2022, yet it remains elevated by historical standards. Metals Focus believes that this deficit will persist in the silver market for the foreseeable future.
Metals Focus anticipates a 6% year-on-year increase in the average silver price, reaching $23.10 this year. As of November 7, prices have already grown by 8% year-on-year. Looking ahead, Metals Focus firmly aligns with the ‘higher for longer’ perspective, particularly concerning US interest rate expectations.
However, the backdrop is less favorable for zero-yielding assets like silver due to prevailing economic conditions. The investment appeal of the white metal is further hindered by reduced confidence in industrial commodities, influenced by the decelerating Chinese economy. With these considerations in mind, Metals Focus maintains a cautious outlook for the silver price throughout the remainder of 2023 and much of 2024.
