Silver in recovery mode

Silver fabrication demand should recover strongly in 2002 as the world’s economies pick up steam, according to World Silver Survey 2002, published by the Washington-D.C.-based Silver Institute.

The current rebound in global gross domestic product (GDP) is already leading to higher demand for a wide range of products containing silver. Over the rest of the year, the health of the electronics industry, in particular, will be an important factor.

Silver fabrication demand dipped 4.9% in 2001, mostly as a result of three factors: a downturn in global gross domestic product, the anemic performance of the electronics industry, and the bursting of the dot-com bubble. In fact, world economic growth slumped to its lowest level since the early 1990s.

Electrical and electronics applications account for the largest amount of industrial silver offtake, consuming nearly 133 million troy ounces last year. Brazing alloys and solders are other important industrial uses of silver, accounting for 36 million oz. in 2001.

Meanwhile, silver used in jewelry and silverware escalated 2.2% in 2001. Asia accounted for most of the global gains, with offtake from India growing nearly 22%.

Demand for silver-bearing photographic products was 4% lower in 2001, in large measure from the slowdown in world economic growth, which affected both consumer imaging and the graphic arts industry. Demand was higher, however, in the U.K. and Japan, and in China, a 30% increase was reported.

Furthermore, radiography remains an important component of silver photographic demand, having consumed 73 million oz. last year, while consumer photographic demand accounted for 87 million oz.

Output of silver coins and medals was off by 9% as a result of lower demand in the U.S. and Germany, the two largest silver coin-manufacturing countries.

Global silver supply fell 6% in 2001. The drop was recorded despite a modest 1.5% increase in mine production. The increase in mine production resulted from growth at several base metals operations, particularly in Peru and Chile, where silver is produced as a byproduct. Of note, material from primary operations generated 25% of total mined silver last year. Mexico again mined the most, followed by Peru, Australia, the U.S. and China.

As for 2002, the weak outlook for base metals prices — coupled with the implementation of numerous production cutbacks at zinc and copper operations, and reduced silver byproduct from gold mines in 2001 — suggest lower silver output.

— The preceding is from an information bulletin published by the Silver Institute.