Metals Focus: U.S. Silver Industrial Demand Strong Despite Rising Comex Stocks
(Kitco News) - Comexsilver warehouse stocks have hit their highest level in 23 years, yetindustrial demand for the metal remains strong, says Metals Focus.
As of alate-Tuesday report, the consultancy said that CME Group Comex silver warehouse stocks stood at around 248 million ounces, their highest since late1994. They have risen from some 183 million ounces at the start of 2017.
“This inturn might suggest that U.S. silver demand, in aggregate, has been struggling,”Metals Focus said. “This is certainly true for physical investment, which hasbeen very weak, but industrial offtake in the U.S. has generally performedwell.”
Analystspoint out that warehouse stocks reflect demand for “999s purity silver,” the minimumstandard for delivering 1,000-ounce bars onto the Comex.
Overall,retail and coin demand for silver has been weak, Metals Focus said. So far inJanuary, U.S. Mint Eagle silver coin sales stand at 3.2 million ounces,compared to 5.1 million for last January.
“Lookingahead, we believe that U.S. coin and bar demand may edge higher this year, butthat is against 2017’s historically depressed total,” Metals Focus said. “This,in isolation, suggests that Comex silver stocks may remain at current levels orease back a fraction over the coming 12 months.”
Meanwhile,industrial demand for silver in the U.S. has remained “relatively upbeat,” theconsultancy said. Aside from brazing alloys, most other areas of industrialconsumption require “9999s purity silver.”
“As aresult, premiums that 9999s silver can attract in the U.S. have generally beenfirmer -- over the past year or so at least -- compared with 999s premiums,”Metals Focus said.
Some ofthe reasons for the strength of 9999s silver demand include strong photovoltaicand automotive demand, Metals Focus said.
“In termsof the former, the strength in the PV market has to some extent been reflectedin rising U.S. silver powder exports,” the consultancy explained. “Availabletrade data for January to November points to a 14% year-on-year rise in thereported volume of these shipments.”
In 2018, U.S.powder exports could ease, but this would be mainly due to the comparisonagainst an “exceptionally strong” performance in 2017, Metals Focus said.
“In otherwords, taking a longer-term view, U.S. powder demand will still remain athealthy levels,” Metals Focus said. “Overall, therefore, the combination of amodest lift in coin and bar demand, together, with a drop in industrialofftake, should see total U.S. silver fabrication demand remain broadlyunchanged in 2018.”
By Allen SykoraFor Kitco News
Follow @AllenSykora
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