Silver supply and demand trends for 2014

The following findings were released by The Silver Institute based on their World Silver Survey for 2015. For more information and to access the full survey, please visit www.silverinstitute.org.

Key components of global silver demand rose in 2014, with global silver jewellery demand posting a new record last year and silverware offtake rising to its highest level since 2006. This was coupled with notable growth in key silver industrial end uses, including ethylene oxide, photovoltaics, and brazing and alloys. Gains in supply from mine production and producer hedging were partly offset by a continued decline in scrap supply.

Silver fabrication demand

Total silver physical demand stood at 1.07 billion oz. last year, which is the fourth-highest level recorded since 1990, but a 4% decline from the 2013 total. A main factor in the decrease in physical demand was a fall in coin and bar demand from 2013, which had been a record year.

The largest component of physical silver demand — industrial applications, which accounted for 56% of total physical silver demand — was marginally lower by 0.5%. On a regional basis, a modest increase in industrial demand in developing countries, led by 4% growth in China and Taiwan, was offset by weaker demand in advanced countries in 2014. This marks the fifth straight year of Chinese industrial demand growth. Last year’s industrial demand total for Taiwan was 23% above their 2009 figure.

Silver demand for photovoltaic applications rose 7% in 2014 while silver demand for ethylene oxide (EO) grew 6%. On the latter, GFMS estimates that 128.6 million oz. silver resided in EO plants around the word at year-end, equivalent to 15% of last year’s total mine production. Brazing alloy and soldering demand also increased by 3 million oz. in 2014. Photography demand slid by 5% in 2014, in its slowest pace of decline since 1999.

Globally, silver jewellery fabrication experienced a second consecutive year of growth, increasing 1.5% to achieve a new record.

This was a reflection of high levels of restocking and a strong performance from India, which surged 47% from 2013 levels. Gains were also noted in Europe, up 9.3%, and North America, up 2.2%. Total silverware fabrication rose 3% to levels not seen since 2006, primarily due to a 20% increase in demand from the Indian subcontinent.

Silver investment & price

In 2014, silver coin and bar purchases stayed at historically high levels, primarily due to growth in silver coin demand in several key markets. Growth was experienced in the U.S., Canada, India and Spain. Silver coins and medals demand was 107.6 million oz. last year.

Holdings by silver-backed exchange traded funds (ETF) remained sturdy, growing by 1.4 million oz., to record their highest year-end level at 636 million oz. In contrast, gold ETF holdings ended 2014 at 53.1 million oz., 8.8% lower than their year-end 2013.

Identifiable investment demand, which includes physical bar investment, coins and medals and ETF inventories, stood at 197.4 million oz. last year. Demand for physical bullion bars reached 88.4 million oz. India experienced a 4% growth in silver bar demand last year, but that was countered by losses in the U.S., China and Europe, when compared to the prior year.

Slower Chinese growth, a move away from commodities as an asset class, a stronger U.S. dollar and a challenging year for most precious metals in general, led to a lower average annual silver price at $19.08 for 2014.

Silver supply 

Silver mine production grew by 5% to reach 877.5 million oz. This growth is attributable to stronger output from the primary silver and copper sectors, new projects that came online last year and production gains in Central and South America. Primary silver mine production grew 8%, and accounted for 31% of global silver mine supply. Mexico was the world’s leading silver producer, followed by Peru, China, Australia and Chile. Primary silver mine cash costs dropped 16% to US$7.74 per oz., while the producer silver hedge book grew by 15.8 million oz. in 2014.

Government silver sales were essentially nonexistent last year. Scrap supply was down 13% at 168.8 million oz. — the lowest volume level recorded since 1996 — and the third straight year of decline. As a proportion of total silver supply, scrap remained just above 15%, down from 25% in 2011 and 2012.