Demand and Supply in 2010

Demand

Total fabrication demand grew by 12.8 percent to a 10-year high of 878.8 Moz in 2010; this surge was led by the industrial demand category. Last year, silver’s use in industrial applications grew by 20.7 percent to 487.4 Moz, nearly recovering all the recession-induced losses in 2009, and is now seeing pronounced advances in 2011. Jewelry posted a gain of 5.1 percent, the first substantial rise since 2003, primarily due to strong GDP gains in emerging markets and the industrialized world’s improving economic picture. Photography fell by 6.6 Moz, realizing its smallest loss in nine years, as medical centers deferred conversion to digital systems. Silverware demand fell to 50.3 Moz from 58.2 Moz in 2009, essentially due to lower demand in India.

 

Supply

Silver mine production rose by 2.5 percent to 735.9 Moz in 2010 aided by new projects in Mexico and Argentina. Gains came from primary silver mines and as a by-product of lead/zinc mining activity, whereas silver volumes produced as a by-product of gold fell 4 percent last year. Mexico eclipsed Peru as the world’s largest silver producing country in 2010, and Peru is followed by China, Australia and Chile. Global primary silver supply recorded a 5 percent increase to account for 30 percent of total mine production in 2010.

Primary silver mine cash costs remained relatively flat year-on-year, falling by less than 1 percent to $5.27/oz. from a revised $5.29/oz. in 2009.

Net silver supply from above-ground stocks increased to 142.9 Moz in 2010, primarily due to higher scrap supply, a shift of net-producer hedging to the supply side, and a considerable rise in net-government stock sales. Regarding scrap supply, 2010 witnessed a 14 percent increase over 2009 as gains in industrial and jewelry recycling exceeded an ongoing decline in recovery from photographic sources.

The swing to net-producer hedging of 61.1 Moz ended a four-year run of de-hedging and is attributed to higher silver prices and was limited to a group of by-product, rather than primary silver producers.

Net government sales of silver rose to 44.8 Moz, primarily the result of increased sales from Russia, with China and India remaining relatively silent for the second consecutive year.

World Silver Supply and Demand

To document these and other market fundamentals, each year the Silver Institute works with GFMS Limited, of London, a leading research company, to prepare and publish an annual report of worldwide silver supply and demand trends, with special emphasis on key markets and regions. This annual survey also includes current information on prices and leasing rates, mine production, investment and fabrication.

To learn more about the general production and uses of silver, please see our Production and Uses pages. For articles related to supply and demand, see the Silver News archives.

Silver Facts

Demand for silver is built on three main pillars: industrial uses, photography and jewelry & silverware. Together, these three categories represent more than 95 percent of annual silver consumption.

Sparkling tableware, shining jewelry, and living spaces brightened by silvered mirrors are the obvious contributions of silver to our daily lives. It is, however, the silver behind the scenes that makes our modern world function more efficiently. Inside switches, silver contacts efficiently and safely turn on and off the powerful electric current that flows into our homes, our lamps and our appliances. It is silver under the keys of computer keyboards, behind automobile dashboards, and behind the control panels of washing machines or microwave ovens that switch on or off at the touch of the finger. And inside the 220-volt line circuit breaker boxes in our homes or inside the 75,000-volt circuit breakers in power stations, silver performs safely and steadily to switch on or off our most dependable servant, electric power, throughout our lives.

Silver has been a multifaceted asset throughout history. It was found as a free metal and easily worked into useful shapes and was widely used by early man. The beauty, weight and lack of corrosion made silver a store of value, and hence one of the earliest of metals to be used as a medium of exchange.

The early discovery that water, wine, milk and vinegar stayed pure longer in silver vessels, led to its desirability as a container for long voyages. Herodotus wrote that Cyrus the Great, King of Persia, a man of vision who established a board of health and a medical dispensary for his citizens, had water drawn from a special stream, “boiled, and very many four wheeled wagons drawn by mules carry it in silver vessels, following the king wheresoever he goes at any time.”

In more contemporary times, when the first telegrapher tapped out his code in 1832, silver was the electrical contact that made the current flow. Earlier that century, when Joseph Nicephore Niepce created the first photographic image obtained through a camera-like device in 1813, it was silver nitrate that made it possible. Finally, when the German obstetrician, Dr. Carl Crede made his medical breakthrough in 1884 to halt the diseases that caused blindness in generations of children at birth, it was silver that killed the viruses.

Today, modern technology has revealed an even more remarkable range of electrical, mechanical, optical, and medicinal properties that have placed silver as the key metal in many applications.

Silver Institute to Issue Investment Report

(Washington, D.C. – April 27, 2011) The Silver Institute will issue a report entitled, The Silver Investment Market – An Update, this summer. The report will examine who is investing in silver, investment in paper instruments linked to silver, physical investment in western and developing markets, silver mining stocks, as well as an analysis of privately held silver bullion stocks. Additionally, the report will provide commentary on future trends in the different components of silver investment demand.

Since 2009, when the Silver Institute issued its initial report on silver investment, this key segment of the silver market has attracted interest worldwide. “This is a good time to take a fresh look at how investors are changing the dynamic of the silver market,” stated Michael DiRienzo, Executive Director of the Silver Institute. GFMS Ltd. has been commissioned to produce this report for the Silver Institute.

In 2011, silver is proving to be the investment metal of choice among investors:

• Silver’s price has increased 48% since the start of 2011, and its strong performance far exceeds the rise in gold prices, which stands at 8%, based on the London Fix.
• Through the first quarter of 2011, total silver exchange-traded fund holdings stood at 612 Moz. When compared with end-March 2010 (471 Moz), they are now over 140 Moz higher year-on-year.
• CME Group announced this week that on Monday, April 25 it had reached record volume in its COMEX silver futures, as well as in open interest of its silver options. Trading of silver futures reached 319,204 contracts, surpassing the prior record of 201,216 contracts set on November 9, 2010. At the same time, open interest in silver options reached a new record of 240,344 contracts. The prior record of 235,992 contracts was set on April 21, 2011.
• In the first quarter of 2011, U.S. Mint sales of their one-ounce silver bullion Eagle coin reached an impressive 12.4 Moz, over 37% higher year-on-year. This comparison is even more striking given that 2010’s full year total for the U.S. Mint was a record high. If this performance is maintained, the U.S. Mint will comfortably achieve a new record in 2011.

The Silver Institute is a nonprofit international industry association headquartered in Washington, D.C. Established in 1971, the Institute serves as the industry’s voice in increasing public understanding of the value and many uses of silver.

 

 

For Further Information Contact:
Michael DiRienzo
Executive Director
The Silver Institute
Tel: (202) 495-4030