Silver Deficit as Production Peaks

Posted | 26/10/2017 / Views | 5347
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Recently we wrote about further evidence that gold production peaked last year and now the same for silver.  First Majestic Silver is one of the world’s biggest primary silver producers and their Vice President of Corporate Development, Todd Anthony last week had this to say regarding the chart below:

"According to the World Bureau of Metal Statistics, silver ore production is down 12% from its high at the beginning of 2016.  This would equal to a 100 million ounce drop in global mine supply (from 850M oz to 750M oz).  I wouldn't be surprised to see this statistic drop another 5% by year-end given the current supply issues in Mexico, Chile and Guatemala." 

(if you can’t make out the numbers, the graph starts in 1995 and you can see the peak around 2015)

Silver Deficit as Production Peaks

We remind you again that around half of silver is used in industry producing products that are largely discarded after use (electronics, solar panels, medical equipment, etc).  In 2016 around 885m oz was mined compared to gold mine production of 104m oz, that’s a ratio of around 8:1 silver to gold and consider half of that 850m oz of silver is ‘used’.  Now compare that 8:1 to the 75:1 gold silver ratio and asked yourself if silver seems a little undervalued…..

Per the table below (courtesy of the Silver Institute and in million oz) demand in 2016 was 1,028m oz meaning this fall in production is coinciding with an existing deficit in supply over demand.

Supply

Mine Production

885.8

Net Government Sales                                 

Scrap

139.7

Net Hedging Supply

-18.4

Total Supply

1,007.1

 

 

Demand

 

 

Jewelry

207.0

Coins & Bars

206.8

Silverware

52.1

Industrial Fabrication

561.9

…of which Electrical & Electronics

233.6

…of which Brazing Alloys & Solders            

 55.4

… of which Photography

45.2

… of which Photovoltaic

76.6

… of which Ethylene Oxide

10.2

… of which Other Industrial

141.0

Physical Demand

1,027.8

 

 

Physical Surplus/Deficit

-20.7

ETP Inventory Build

47.0

Exchange Inventory Build

79.8

Net Balance

  -147.5

 

Sometimes numbers just speak for themselves…..