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Global Silver Production and Demand DROPS for the First Time in 14 Years

Rory Hall
|
Thursday, May 11th

hat tip/Louis-smaulgld.com

For the first time since 2002 global silver mining/scrap production dropped. Silver is a direct reflection of electronics demand and manufacturing. Without silver our world would not be the same. The computer or phone you’re reading this on would not exist. The TV, wiring in your house, just for starters, would not work without silver. Silver is a great indication of how our economy – globally – is growing or contracting. It appears there was a contraction in 2016. Just remember, the economy is robust and growing, or so they say on TV.

What does it mean?

Well, according to what we have witnessed over the past three weeks with the rigged COMEX silver “price mechanism” absolutely nothing. Could it be the criminals at the CME Group and bullion banks had an advanced copy of the Silver Institutes report and have been beating down silver in preparation of this news being released today? Anything’s possible.

Silver production declined 32.6 million ounces. This decrease was in both mine production and scrap. In the grand scheme of things, it’s not that much of a drop, but in a market the size of the silver market it is a significant amount. With just over 1 billion ounces coming to market in 2016 this represents a 0.32% of the overall market.

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 ounces (Moz) in 2016. Source

Global mining production in Mexico dropped the most with Australia and Argentina adding the overall drop. The bright spots in the global silver mining production were in Peru, China, Chile and Russia. Had these countries not posted net gains the drop could have been far worse.

Global silver mine production declined by 0.6 percent in 2016 to a total of 885.8 Moz.  A large proportion of the drop was attributable to the lead/zinc and gold sectors, where production dipped by a combined 15.9 Moz.Source

Silver “scrap” was the biggest loser in 2016 posting the lowest amount of silver scrap since 1996!! It sounds like grandma’s silver set is either tucked away in the back of the closet or was sold off during the last up-leg in silver “pricing”.

While silver jewelry production dropped in 2016 it was coming off a record level 223 million ounces in 2015. While silver jewelry declined by just over 16 million ounces it still chimed in at 207 million ounces with coins and bars coming in just shy of that number at 206.8 million ounces. Jewelry accounts for the second largest use of silver. With silver coins and bars sales falling off a cliff in 2017 it will be interesting to see how jewelry fares in this depressed market.

Silver used for solar panels made a huge move in 2016 with a 34% increase. While the Silver Institute does not mention the projects in China, India and Morocco I feel confident these were driving force behind this surge in solar panel production. The cost per kilowatt produced by solar has dropped significantly over the past several years and this has definitely added to the increase of solar panel production.

Silver demand for photovoltaic applications posted a noteworthy 34 percent rise to reach 76.6 Moz.  This growth was the strongest since 2010 and driven by a 49 percent 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 percent rise in global capacity. Source

If we simply add the demand for silver jewelry, coins and bars and silverware we find a total of 465.9 million ounces. That leaves just over half the 1.007 billion ounces of TOTAL silver available for all uses. With the surge in solar panel production and that segment of the market using another 76.6 million ounces (this number will probably grow even larger in 2017) that only leaves 464.6 million ounces for all other silver applications! Not much silver to go around considering there are new uses and applications coming online all the time.

The only good news regarding the volume of silver being used is the fact that all segments of silver use dropped, with two exceptions!! This is a direct reflection of the global economy grinding to halt. If you review the various segments that used silver you will see overall demand declined.

Now for the numbers as reported by the Silver Institute:

World Silver Supply and Demand (million ounces)
(totals may not add due to rounding)


Supply

 20152016
Mine Production890.8885.8
Net Government Sales
Scrap141.1139.7
Net Hedging Supply7.8-18.4
Total Supply1,039.71,007.1




Demand

 20152016
Jewelry228.3207.0
Coins & Bars290.7206.8
Silverware62.952.1
Industrial Fabrication569.6561.9
…of which Electrical & Electronics245.9233.6
…of which Brazing Alloys & Solders61.555.4
… of which Photography46.645.2
… of which Photovoltaic57.276.6
… of which Ethylene Oxide10.210.2
… of which Other Industrial148.4141.0
Physical Demand1,151.51,027.8
   
Physical Surplus/Deficit-111.8-20.7
ETP Inventory Build-17.747.0
Exchange Inventory Build12.679.8
Net Balance-106.7  -147.5
   
Silver Price, $per oz.15.6817.14


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