The silver market underwent considerable changes in supply, demand and prices in 2001, according to Silver Survey 2002, published by London-based CPM Group.
Prices dropped 12.4% last year to an average of US$4.38 per oz. compared with US$5 in 2000. Despite this decline, supply rose 3.1% in response to a rise in mine production, government disposals, and secondary silver flow. Fabrication demand slipped 4.7% worldwide, as demand for silver-bearing products and processes fell in most countries and regions. India and Thailand were the two notable exceptions, where overall silver demand rose.
Investors continued to sell silver bought in previous decades. Trading volumes fell in most major markets, reflecting cutbacks and closures at major bullion trading banks and brokerage companies. The deficit of newly refined silver supply relative to fabrication demand contracted in 2001, but a deficit still persisted.
The market shifted in the final quarter of 2001, with the supply-demand balance tightening and prices rising in response. These trends continued in the first quarter of 2002.
Silver fabrication demand is expected to rise 3.7% this year to 860.7 million oz., while total supply could see a 1% decline to 739 million oz. Mine production and secondary supply are forecast to experience marginal declines, while the flow from government disposals will likely fall.
CPM Group reports the following developments in 2001:
– The physical silver market operated in a deficit for the 12th consecutive year, with newly refined supplies falling short of industrial demand by 83.8 million oz., down from 147.4 million oz. in 2000.
– Production from mines rose 2.7% to 502.8 million oz.
– Secondary supply rebounded from the previous year’s decline, rising 2% to 203.6 million oz. Old scrap and Indian scrap supply expanded, while coin melt was just one-third the previous year’s level, at 2 million oz.
– Industrial demand for silver fell 4.7% to 830.2 million oz.
– Photographic demand for silver fell 2%, electronics and batteries demand declined 9%, and demand in all other uses dropped 14.8%.
– Silver use in coinage totalled 17 million oz., down from 25 million oz. in 2000.
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