Silver demand hit record high in 2015

Demand for silver hit a record-high last year with the jewellery, coin and bar, and photovoltaic sectors, helping to boost the precious metal’s sales to 1.17 billion ounces.

Overall, however, the market registered its third consecutive annual deficit, which was 60% larger than 2014, shows the latest World Silver Survey published Thursday by GFMS in collaboration with the Silver Institute.

According to the report, the shortage was led by the continued weakness in scrap sales and a sharp increase in physical demand.

Silver demand hit record high in 2015

Source: 22nd World Silver Survey.

Globally, jewellery making increased for the third consecutive year to a fresh high at 226.5 Moz.

The increase was largely achieved on the back of a 16% rise from both India and Thailand, while North America posted a 5% annual increase.

The gains were partially offset by a sizable contraction in Chinese jewellery offtake.  Total silverware fabrication enjoyed its third successive annual rise to an estimated 62.9 Moz, a ten-year high.

Silver demand hit record high in 2015

Source: 22nd World Silver Survey.

The largest component of physical silver demand, industrial applications, which accounted for 50% of total physical silver demand last year, fell 4% to almost 589 Moz.

On a regional basis, modest increases in industrial demand were posted in the US and Japan, the second and third largest sources of industrial demand, respectively.

Silver prices closed April with a gain of 15.2%. That was the metal's largest monthly increase since August 2013.

Electrical and electronics use declined by 10% last year to 246.7 Moz, due to slower economic growth in developing countries and the continued weakness in computer sales.

There were several highlights within the industrial segment.  Silver demand for photovoltaic applications climbed 23% in 2015 to 77.6 Moz, marking the second consecutive year of growth in this sector on the back of strong growth in Chinese solar panel installations.

Supply and prices

On the supply side, the research found that silver mine production growth slowed to 2% last year, reaching a record 886.7 million ounces. "The overall slowdown in mine production last year is expected to continue," the report said.

An extremely challenging year for nearly all commodities, along with a continued slowdown in Chinese economic growth and a stronger U.S. dollar, led to a lower average annual silver price of US$15.68/oz in 2015.

Silver demand hit record high in 2015

Source: 22nd World Silver Survey.

The analysts, however, said the lower price environment helped boosting physical demand, particularly as long-term investors viewed lower prices as key entry points in expectation of future price appreciation.

GFMS experts are not alone in predicting a rosy outlook for the silver price. Last week, analysts with Bank of America Merrill Lynch said silver's fundamentals look the strongest in years thanks to declining mine output and rising industrial demand.

Silver prices climbed 5.4% last week, closing April with a gain of 15.2%. That was silver's largest monthly gain since August 2013.

Only around 30% of global output is from primary silver mines, less than the contribution of by-product production at zinc and lead mines where a number of mine closures are in the offing. The bulk of silver usage is also in industrial applications including alloys, electronics, photovoltaic and for the production of ethylene oxide.