Modest silver price hikes forcast

The best-performing metal in 1993 may have been silver, but Metals & Minerals Research Services sees only modest price increases for the metal in the years ahead.

However, the London-based company, whose recently completed study, Silver: market fundamentals, forecasts developments to the year 2000, does project an upward trend for real silver prices.

Silver recorded a high last year of US$5.37 per oz. and a low of US$3.55, in part reflecting the fundamental changes to the supply side stemming from historically low prices and resulting in the market deficit experienced from 1990 to 1993.

The company forecasts 1994 primary refined silver production to be 32 million oz. less than in 1993, which will be offset to some extent by increased secondary production and imports from the former east bloc.

For the rest of the decade, mine capacity growth is forecast to be modest in both the main and byproduct sectors. However, ample space capacity exists for reactivations to accommodate any looming supply gap. Metals & Minerals believes this development would probably begin not long after real prices had established themselves above the US$6-per-oz. level and would dampen the potential for further price increases.

Far Eastern jewelry demand is forecast to dip this year because of higher silver prices. But in the longer-term, industrial growth will compensate for this reduction. The photographic sector will continue to be the main demand driver, with growth in this sector forecast to average 2.1% per year to 2000. Silver stocks will continue to overhang the market. The company estimates the current stock overhang exceeds 58,000 tons or 3.5 years of commercial demand. The cost of the study is 8,250. For more information, write Graham Deller, Metals & Minerals Research Services, 2-4 Henry St., Bath, Avon BA1 1JT, U.K.