Facts and Figures: Global silver demand rises 4% in 2018, says Silver Institute

The following is a release by the Silver Institute relating to the publication of the 29th edition of its World Silver Survey, which was independently researched and compiled by the GFMS team at Refinitiv.  Established in 1971, the Silver Institute is a non-profit international association that draws its membership from across the breadth of the silver industry, including silver mining houses, refiners, bullion suppliers, manufacturers of silver products and wholesalers of silver investment products. Visit www.silverinstitute.org to download a pdf of the report or to purchase a printed copy.

Despite headwinds that confronted many asset classes in 2018, including most of the commodities complex, three significantly positive developments emerged in the silver market last year. First, total silver demand increased for the first time since 2015, rising 4% to 1.03 billion ounces. Second, there was a robust recovery in retail investment, led by silver bar demand, which climbed sharply last year. Third, on the supply side, global mine supply fell for the third straight year, after 13 annual increases before 2016.

Silver scrap supply has been in retreat since 2012 and fell nearly 2% last year. These factors led to another tightening of the supply-demand balance, contributing to a physical deficit of 29.2 million oz. in 2018. 

Demand

The 4% growth in total silver demand for 2018, reaching 1.03 billion oz., marked a three-year high. The silver coin and bar category rose 20%, although the rise was entirely driven by silver bar demand, which jumped 53%. Silver bar demand was led by strong sentiment in India, where demand leaped 115% higher last year. In contrast, coin and medal demand dipped 4%, although the decrease was lower than the losses recorded in 2017.

Silver jewellery demand moved 4% higher in 2018 to 212.5 million ounces. India was again the standout, pushing its demand for jewellery up 16% to achieve a record level. Demand also picked up strongly in North America, with the U.S. posting a 7% rise to an all-time high at 17.4 million ounces. Global demand for silverware jumped 6% last year to 61.1 million oz., led by a recovery in demand from India, which experienced a 10% increase to 41.8 million ounces. Turkish silverware demand rose 20% to 1.6 million oz. — a level not seen since 2009.

Global industrial silver demand contracted 1% to 578.6 million oz., primarily due to a dip in silver’s use in photovoltaics (PV), which was down 9% last year. The PV sector faced thrifting and substitution pressures last year. Looking ahead, demand for silver from the PV sector could improve as governments from various countries continue their commitment to generating electricity from renewable energy sources, including solar. Australia, Europe and India could see more installations of solar energy systems in the coming years.

Electronics and electrical demand, the largest component of industrial silver demand, consumed 248.5 million oz. last year — a 2% increase over 2017. China, the U.S., Japan, Germany and India were the main demand centres in this category. Brazing alloys and solders consumed 58 million oz. in 2018 — a 1% increase over the previous year — led by demand in China, the U.S., Japan, India and the United Kingdom.

Silver’s use in photography fell 4% last year to 39.3 million oz., but demand appears to have stabilized, with renewed interest in various photographic applications using silver, especially instant photography systems, which are popular among the youth demographic. 

Supply

Global silver mine production fell 2% in 2018, experiencing its third consecutive annual decline to 855.7 million oz., after supply disruptions in Canada, Guatemala and the United States. For the second year, the biggest year-on-year variation was posted by primary silver mines, which decreased 7% in 2018 to contribute 26% of total mine supply. The lead-zinc sector contributed 38% of by-product silver output, followed by copper at 23%, and gold at 12%.

Workers underground at Americas Silver’s San Rafael silver-zinc-lead mine in Sinaloa, Mexico. Credit: Americas Silver.

At the regional level, North America posted the biggest contraction last year, dropping 6%. Offsetting those losses was a record output from Mexico, which was once again the world’s top silver-producing country, trailed by Peru, China, Russia and Chile.

Silver scrap supply fell 2% to 151.3 million ounces. Lower silver prices accounted for most of the decline, discouraging suppliers and consumers from recycling their silver valuables.

After nine consecutive annual increases, identifiable above-ground stocks fell 3% last year. North America was the only region to report an increase in above-ground stocks and was up 9%, while Europe recorded a 9% decline and Asia posted a 14% decline.

GFMS reports that government silver sales were once again absent from the silver market in 2018, while the delta-adjusted hedge book declined 2.8 million oz. last year.

Price and investment

The annual average silver price fell 7.8% to US$15.71 per oz. last year, with prices trading in a US$13.97 to US$17.52 per oz. range. A combination of factors, including a rising U.S. dollar, interest rate hikes, the trade dispute between the U.S. and China, and lower global economic growth projections from the International Monetary Fund, affected the silver price last year.

Identifiable investment, which consists of net-physical bar investment, coins and medals purchases, and net changes to exchange-traded product (ETP) holdings, rose  5% in 2018, reaching 161 million ounces. This rise was entirely attributed to the upsurge in silver bar purchases. In contrast, total global ETP holdings decreased 20.3 million oz. to finish 2018 at 649.5 million ounces.