Silver demand to surpass 1 billion ounces this year, hitting a 6-year high - Silver Institute
(Kitco News) -The global silver market will see demand reach 1.29 billionounces this year, the first time it has breached 1 billion since 2015,according to the latest report from the Silver Institute.
Wednesday, in its interim market report, the Silver Institutesaid that silver demand had seen broad-based growth through 2021, withindustrial demand leading the way.
"The recovery in silver industrial demand from the pandemicwill see this segment achieve a new high of 524 million ounces (Moz). In termsof some of the key segments, we estimate that photovoltaic demand will rise by13% to over 110 Moz, a new high and highlighting silver's key role in the greeneconomy," said analysts at Metals Focus, who conducted the latest researchon behalf of the Silver Institute.
The report also noted robust investment demand with interest inphysical bullion expected to increase 34% or by 64 million ounces to 263million ounces, representing a six-year high.
"Growth began with the social media buying frenzy beforespreading to more traditional silver investors. Indian demand reflects improvedsentiment towards the silver price and a recovering economy. Overall, physicalinvestment in India is forecast to surge almost three-fold this year, havingcollapsed in 2020," the analysts said.
Paper demand for silver is also expected to increase in 2021.Holdings in silver-backed exchange-traded funds are projected to rise by 150million ounces.
"During 2021 and through to November 10, holdings rose by 83Moz, taking the global total to 1.15 billion ounces, close to its record highof 1.21 billion ounces which occurred on February 2, at the height of thesocial media storm," the analysts said.
The report said that silver jewelry and silverware fabrication isexpected to see partial recoveries from the 2020 depressed levels, growing by18% and 25%, respectively.
"Both markets will benefit from a marked upturn in all keycountries, especially in India as the economy and consumer sentiment havebounced back more quickly than expected, and as restrictions ended in time forthe all-important wedding and festive season," the analysts said.
Looking at the supply side, Metals Focus said that mineproduction is forecasted to increase by 6% to 829 million ounces.
"This recovery is largely the result of most mines beingable to operate at full production rates throughout the year following enforcedstoppages in 2020 due to the pandemic. Those countries where output was mostheavily impacted last year, such as Peru, Mexico and Bolivia, will have thebiggest increases," the analysts said.
Looking at the market's supply/demand fundamentals, Metals Focuslooks for silver to see a modest supply deficit of 7 million ounces. "Thiswill mark the first deficit since 2015," the report said.
The optimistic demand outlook comes as silver prices see arenewed uptrend. December silver prices last traded at $25.215 an ounce, up 1%on the day. Economists have noted that precious metals have seen new bullishmomentum after consumer inflation rose to its highest level in 31 years.
One billion ounces is just the start - Hecla CEO
Phillip Baker, CEO of Hecla Mining, said in a telephone interviewwith Kitco News that he expects silver prices to remain in a strong uptrend asinvestors look for inflation hedges.
"Right now, we are seeing the consequences of trying tosmooth out our economic system and avoid crisis," he said. "Theresult is higher inflation and it is doesn't seem to be very transitory."
Tuesday, Hecla, which represents 40% of all silver mined in theU.S., rang the closing bell on the New York Stock Exchange. This year thecompany is also celebrating its 130th anniversary.
Baker added that he expects silver demand to continue to grow andsees the potential of a 2-billion ounce market in the next 30 years.
"There's no doubt that with the desire to have clean energy,the demand for silver is going to continue to increase and increase probably ata much faster rate than what we've seen in the past," he said. "Withall that demand, silver is more expensive."
To put the demand growth into perspective, Baker said that theworld would need to see seven to ten new mines the equivalent size of its GreenCreek in Southeast Alaska. The mine is forecasted to produce about 10 millionounces of silver this year. It is one of the largest primary silver producersin the world.
By Neils ChristensenFor Kitco News
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