Silver market to hit multi-decade high deficit this year on strong demand - report
(Kitco News) - According to the Silver Institute, global silver demand is forecast to reach a record total in 2022, driven by new highs for industrial demand, jewelry and silverware offtake and physical investment.
These were some of the key findings reported by Philip Newman, Managing Director at Metals Focus, and Adam Webb, Director of Mine Supply, during the Silver Institute’s Interim Silver Market Review in New York today, which featured historical supply and demand statistics and estimates for 2022.
The authors of the report said that global silver demand is expected to reach a new high of 1.21 billion ounces in 2022, up by 16% from 2021, adding that each key segment of demand, except photography, is set to post a new peak.
According to the report, industrial demand for silver is on course to grow to 539 million ounces (Moz) in 2022, up 5% compared to 2021 (511 Moz).
“Developments such as ongoing vehicle electrification (despite sluggish vehicle sales), growing adoption of 5G technologies and government commitments to green infrastructure will have industrial demand overcome macro-economic headwinds and weaker consumer electronics demand,” it said.
To add more, physical investment in 2022 is on track to jump by 18% to 329 Moz, which would also be a new record. Exchange-traded products, in contrast, are forecast to see the largest annual decline in holdings totaling 110 Moz, due in part to silver’s higher volatility than gold, which has made it more vulnerable to profit-taking.
Silver jewelry and silverware demand also set to surge by 29% and 72% respectively to 235 Moz and 73 Moz this year, mainly thanks to an unprecedented rebound in Indian demand. This has partly been driven by strong inventory replenishment ahead of the festive and wedding season, following heavy stock depletion in 2021.
This year, Metals Focus expects the average silver price to ease by 16% year-on-year, to $21.00. Metals Focus expects the U.S. Fed to continue lifting interest rates, raising the opportunity cost for precious metals and this, combined with rising yields and ongoing dollar strength, will continue to exert pressure on silver prices.
As for silver supply, in 2022, mined silver production is expected to rise by 1% year-on-year to 830 Moz. Output from Mexico will rise most significantly as several major new silver projects that have come online in recent years continue to ramp-up to full production rates. By-product silver production from existing mines and new projects in Chile will also be a major contributor to growth. Partially offsetting these rises will be lower output from major silver producers such as Peru, China, and Russia.
Importantly, the global silver market is forecast to record a second consecutive deficit this year. At 194 Moz, this will be a multi-decade high and four times the level seen in 2021, the analysts concluded.