While a lot of precious metals investors are solely focusing on gold, we would almost forget about silver, also called ‘the poor man’s gold’ although things are changing fast on this market as well.
2016 was the first year in more than a decade in which primary silver production (coming from mines either as a main product or a by-product credit) decreased. After seeing a total silver production of approximately 668 million ounces in 2007 increasing to 891 million ounces in 2015, we saw a (first) decrease to 886 million ounces in 2016.
Source: The Silver Institute
As you can see on the previous image, the total recovery from scrap and the inflow from hedges decreased as well, causing the total silver supply to decrease by approximately 3% to 1.007 billion ounces, the lowest level since 2013.
While the total demand for silver also decreased to 1.028 billion ounces, 2016 was the fourth consecutive year with a supply deficit. Sure, the deficit was just 21 million ounces, but that’s entirely due to the lower demand for jewelry and investment purposes. As you can clearly see in the same table, the demand from those two end-uses was 519 million ounces in 2015, but fell to just 414 million ounces in 2016, a decrease of 105 million ounces.
Source: Ibidem
One of the arguments of bears is the decreasing use of the precious metal in the photographic sector. It’s absolutely impossible to deny, but it’s also already clearly visible in the trend since 2007. In 2007 the silver demand for the photographic sector was 117 million ounces 12.32% of the total world demand, but last year, the sector needed just 45 million ounces of silver, which is now just over 4% of the total world demand.
This means that even if the demand for photographic uses would drop to zero (which isn’t impossible, although the sector demand has remained relatively stable since 2013), this would most definitely NOT cause a shift of the demand curve. One main contributor to the steady demand would be the increased use of the photovoltaic sector, where silver demand reached its highest point éver.
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