Silver is the poor man’s precious metal, overshadowed by the shinier gold and being left behind by the platinum and palladium as their growing industrial use has seen demand outstrip supply and prompt price booms.
Both platinum and palladium do face uncertain futures as electric vehicles of all types replace internal combustion engine (ICVs) vehicles where they are used extensively in exhaust systems as catalysts in both ICE and hybrids which should ensure solid demand for the next decade.
Both thoughts will find greater demand when the hydrogen revolution moves from thought bubbles to actual production, consumption and demand.
What, then, is the outlook for silver, a metal that has been forgotten for several years, judging by global demand estimates.
Silver is more a by-product of lead, zinc or copper mining in Australia – north Queensland for example has the huge Mount Isa mining complex owned by Glencore where lead, zinc and silver is mined.
Nearby Cannington (S32) is predominantly a silver mine and nearby Ernest henry (bought last week by Evolution) is a copper, gold and silver mine. There are the smaller mines such as the Tritton copper and silver mine in NSW (with a possible extension being looked at) and Dugald River (Queensland) and Golden Grove (WA).
The great foundation of Australian mining – Broken Hill – was a fabulous series of lead, zinc and silver mines that were the foundation of BHP, Rio Tinto and S32 among others.
The Silver Institute this week sees demand reaching 1.29 billion ounces this year, the first time it has topped the billion-ounce mark since 2015.
The optimistic demand outlook comes as silver prices see a renewed uptrend. Comex December silver prices last traded at $23.496 an ounce on Thanksgiving Eve, down $US1.7 an ounce over the past week as gold tumbled back under $US1,800 an ounce level.
It like gold has been given a bump higher because of worries about rising inflation. Silver also benefits by being a cheaper way to invest in precious metals than gold which rose above $US2,000 an ounce in August 2020. Silver topped $US27.50 an ounce.
The Silver Institute said that silver demand had seen broad-based growth through 2021, with industrial demand leading the way.
“The recovery in silver industrial demand from the pandemic will see this segment achieve a new high of 524 million ounces (Moz). In terms of some of the key segments, we estimate that photovoltaic demand will rise by 13% to over 110 Moz, a new high and highlighting silver’s key role in the green economy,” said analysts at Metals Focus, who conducted the latest research on behalf of the Silver Institute.
The report also noted solid investment demand with interest in physical bullion expected to increase 34% or by 64 million ounces to 263 million ounces, representing a six-year high.
“Growth began with the social media buying frenzy before spreading to more traditional silver investors. Indian demand reflects improved sentiment towards the silver price and a recovering economy. Overall, physical investment in India is forecast to surge almost three-fold this year, having collapsed in 2020,” the analysts said.
Paper demand for silver is also expected to increase in 2021. Holdings in silver-backed exchange-traded funds are projected to rise by 150 million ounces.
“During 2021 and through to November 10, holdings rose by 83 Moz, taking the global total to 1.15 billion ounces, close to its record high of 1.21 billion ounces which occurred on February 2, at the height of the social media storm,” the analysts said.
The report said that silver jewellery and silverware fabrication is expected to see partial recoveries from 2020’s depressed levels, growing by 18% and 25%, respectively.
“Both markets will benefit from a marked upturn in all key countries, especially in India as the economy and consumer sentiment have bounced back more quickly than expected, and as restrictions ended in time for the all-important wedding and festive season,” the analysts said.
Looking at the supply side, Metals Focus said that mine production is forecasted to increase by 6% to 829 million ounces.
“This recovery is largely the result of most mines being able to operate at full production rates throughout the year following enforced stoppages in 2020 due to the pandemic.
“Those countries where output was most heavily impacted last year, such as Peru, Mexico and Bolivia, will have the biggest increases,” the analysts said.
Looking at the market’s supply/demand fundamentals, Metals Focus looks for silver to see a modest supply deficit of 7 million ounces. “This will mark the first deficit since 2015,” the report said.
In terms of the full year price average, Metals Focus expect silver to rise by 24% year-on-year to $US25.40. This would achieve the highest annual average since 2012’s $US31.15.