What is the supply demand outlook for silver and the pricing forecast moving forward?
To look forward in 2023, we must look back. In 2022, global silver demand reached an all-time high of about 1.24Boz. Every key segment, apart from photography, grew. Industrial demand grew to almost 540Moz, and we saw the silver market transition into a deficit in 2021. That grew to over 250Moz last year. This year, we think that deficit is going to decline slightly, although it will remain historically high. We think that industrial demand is going to achieve an all-time high of about 550Moz, yet we believe that global total demand for silver will dip a bit this year. Even so, it’ll be the second highest year on record for global silver demand, and the decrease is mainly due to India. India had a banner year in 2022, and we think that their jewelry and silverware offtake will be a little short of 2022 numbers.
Let’s talk about the fundamentals of mining silver. Typically, it’s seen as a byproduct of other metals. So how does the industry actually focus on growing the supply when it’s needed?
70% of silver comes from byproduct metal mining activities. Whether that be gold, lead, zinc, tin, or copper, primary silver mines only account for 29 to 30% of global mine supply that comes to the market.
Companies that consider themselves primary silver miners will always look at the financial feasibility of extracting more silver on that property, but they’re also benefiting from other mining activities. When they’re mining silver, they’re also getting zinc and other metals. Some of our companies make a big profit off of their zinc and other metal mining, but still consider themselves to be pure silver miners.
Last year, we saw about a 1% increase in global silver mining supply. That’s due to a ramp up of production in certain countries, like Mexico and Peru. They were somewhat hamstrung because of the COVID restrictions back in 2020 and 2021. This year, we expect silver mine supply to increase by an even greater amount, by about 3 – 4%, maybe even 5%. It may be reaching its highest level since 2016.
What are some of the geopolitical factors or other economic factors that are impacting mine supply?
Mining, not unlike any other industry, is always faced with geopolitical issues. If you just look at what’s taking place in Peru right now, we think the first quarter output in Peru will be stymied based on the geopolitical disruptions. We also think that what’s taking place in the Ukraine and Russia could have an effect on silver supply. However, we still believe that mine output will increase this year.
Silver has a dual role, both as a precious and an industrial metal. How does this impact the profile of the metal?
There are several reasons why silver has a duality. Silver is a store of value. It has been for centuries. Last year, physical investment in silver reached over 350Moz and support has come from many aspects, including inflation fears, the previously mentioned war in Ukraine, and an overall mistrust in government. You see a lot of people buy silver on price dips. It’s a highly speculative and volatile market.
While we saw some sales out from ETPs last year, historically, when the silver investor buys exchange traded products, they are stickier and hold that position. With respect to this year, we think that physical investment may reduce, but nonetheless, we’re already seeing, in the first two months of 2023, robust demand for silver bars and silver coins. Now, turning the corner as an industrial metal, as you know, over 50% of silver demand goes to industrial components. Silver is an essential component in many industries, it truly surrounds us all.
We’re already seeing, in the first two months of 2023, robust demand for silver bars and silver coins
The global energy transition is a huge topic for the mining industry today. Can you talk a bit about silver’s role within this?
That’s a great question. It’s one of our focal points for 2023 and beyond. Silver is the best conductor of electricity. It’s used across a variety of decarbonization applications, primarily in photovoltaics.
Photovoltaics, if you go back 10-12 years ago, didn’t even have a category in the World Silver Survey, but it has grown over the years. About 120-130Moz of silver was consumed in this one application globally just last year, and that number’s going to grow significantly in 2023 onwards.
The reason is, that to take the energy and store the energy, these solar cells are coated with a silver paste, which allows the electrical conductivity to turn that into energy when called upon. Last year, China had a 62% increase in its installations of solar panels throughout the country. The United States was not far behind. It’s not just photovoltaics either.
Similarly, when you look at the automotive industry, battery electric vehicles, (BEVs, EVs, or hybrid vehicles) are requiring more and more silver, not in the battery, but in the components of the car. 60Moz of silver was used in 2022 just for electric vehicles, which makes up about 4% of cars sold globally. We project this number to grow to 90Moz by 2025.
We’ve seen a lot of headway being made in the green steel industry as well as other industries. Is the silver industry also focusing on greener mining and decarbonizing the actual operations?
We just included a section on our website (a year and a half ago) on silver and sustainability, which addresses the commitment that our member companies have made to ESG efforts. Shortly, we’ll be releasing a report entitled Silver and the Low-Carbon Economy, talking specifically to silver’s role in decarbonization at these particular mine sites. It’ll also address the great work our member companies are doing on a mine-by-mine and company-by-company basis to make their operations greener.
In addition, we’re putting out another report later this year, which will address silver’s role in the green economy, focusing heavily on electric vehicles. We’re going to take a look at solar panels and, for the first time, how much silver is used in wind power energy and nuclear energy. We look at silver as a critical mineral. You can’t do it without silver.
