The following is an edited release by the Silver Institute upon 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 32.6 million oz. in 2016. New highs were recorded for silver’s use in the photovoltaic and ethylene oxide sectors, both growing and significant industrial applications for silver.
Global silver mine production declined 0.6% in 2016 to a total of 885.8 million ounces. A large part of the drop owed to the lead-zinc and gold sectors, where by-product silver production dipped 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 the losses were partly offset by gains in Central and South America and Asia. But Mexico was again the world’s largest silver-producing country, followed by Peru, China, Chile and Russia.
Primary silver mine production grew 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 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 ounces.
The annual average silver price posted a 9.3% increase in 2016 — its first rise since 2011. Helping the price was last year’s supply and demand scenario, which led to another annual silver market deficit that was 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 ounce.
Identifiable investment — which consists of physical bar investment, coins and 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. In a broader context, this investment was still 23% higher than the average over the decade preceding 2015. Holdings in global ETPs increased 47 million oz. last year, posting an all-time high in October.
Silver coin and medals fabrication fell 9% in 2016 from its record high in 2015 to 123.2 million ounces. Even so, coin and medal fabrication was still at its second-highest level this century. Silver bar investment fell 46%, mainly the result of lacklustre demand in India due to higher prices, destocking and government measures on unaccounted wealth. Increases in bar demand occurred in Germany and the United Kingdom.
Total physical demand fell 11% in 2016 to 1,027.8 million oz., pulled lower by weaker offtake for jewellery, 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. saw 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 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 jewellery 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. But demand was stronger in Indonesia, Vietnam, and the U.S., which had a 12% increase in jewellery fabrication, reaching 16.1 million oz. silver last year. Globally, silverware declined 17% to 52.1 million oz., with higher silver prices accounting for most 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 just 3% in 2016 to 45.2 million oz. silver, representing the lowest percentage decline since 2004, potentially indicating that most 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. Please visit www.silverinstitute.org for more information and to download and purchase the World Silver Survey 2017.