Key components of the silver market affected by the pandemic in 2020

(PRESS RELEASE)The Silver Institute hosted a webinar to discuss its annual interim review of the silver market. Philip Newman, Managing Director of Metals Focus, and his colleague, Adam Webb, Director of Mine Procurement, presented the results. The mid-review presents historical statistics on supply and demand and provisional estimates for 2020. Here are the main highlights of the presentation:

Physical investment is expected to increase 27% to 236.8 Moz in 2020, which would be a 5-year high. The largest retail market for bullion and coins, the United States, will lead the way with a projected gain of 62%. This reflects the impact of increased price volatility and sound price expectations. The second largest market, India, however, experienced a significantly weaker second half, with outright liquidations resulting in an estimated 20% drop for the full year.

The most significant development in the silver investment market this year has been the strength of demand for silver-backed exchange traded products (ETPs). Gains since the start of the year (through November 13) have reached 326 Moz. As a result, global holdings for the first time comfortably exceeded 1 billion ounces, hitting a new record high of 1.062 billion ounces. For the year as a whole, Metals Focus predicts an increase of 350 Moz from end-2019 levels, which compares extremely favorably with an increase of 81.7 Moz last year.

This year, the price of silver has risen sharply, realizing an intra-annual gain (until November 13) of 38%, as the COVID-19 pandemic has led to an increase in demand for safe-haven securities. This price increase was accompanied by a marked improvement in the gold / silver ratio. After hitting a record 127: 1 in March, the ratio has fallen to 76 this month. On an annual average basis, Metals Focus expects the price of silver to increase 27% year-on-year to an average of $ 20.60. This would represent the highest annual average since 2013.

Silver mining production is expected to drop 6.3% in 2020 to 780.1 Moz. This reflects COVID-19 lockdowns implemented by several major silver producers in the first half of the year, which forced mines to temporarily halt production. This resulted in a drop in production from Mexico, Peru and China. The last national restrictions on mining were lifted at the end of May and most mines have now returned to full production. However, there is a continued risk of localized virus outbreaks, which may impact the production of individual operations in the future.

The pandemic has also had a pronounced impact on the demand for money, particularly in March / April. Although demand has recovered from this low, most regions are still on track for heavy full-year losses. Industrial manufacturing, for example, is expected to fall 9% this year to 466.5 Moz, a five-year low. This reflects the impact of foreclosure restrictions as supply chains are severely disrupted, end users take an increasingly cautious approach to inventory replenishment and factories facing labor supply issues. artwork.

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For some of the major end-use industrial segments, Metals Focus estimates PV demand will drop 11% to around 88 Moz. Even so, it remains a historically high total. The use of silver in the automotive sector is seeing a slightly more pronounced decline, as the estimated 17% drop in global light vehicle production outweighs the continued gains in the use of silver in each vehicle. A good note is that sectors related to home improvement have often performed better due to the increasing trend of telecommuting.

Global demand for silver jewelry and silverware is expected to drop 23% and 34% respectively in 2020, to 153.6 Moz and 40.8 Moz. Heavy losses in India underlie the weakness in each segment. This in turn reflects the impact of widespread lockdowns (to combat the pandemic) that have hit disposable incomes, high – and sometimes record-breaking – rupee money prices and a weak Indian economy. The world’s second largest consumer of jewelry, the United States, has also weakened, even if the extent of the drop was more modest than for gold and a significant destocking implies a sharp turnaround soon for suppliers in this market. .

Overall, and despite a modest increase in scrap, the global silver market is expected to experience another physical surplus in 2020, of 31.5 Moz, the highest in three years. This compares to 26 Moz in 2019 and represents the fifth uninterrupted annual surplus in the silver market. Even so, the strength of global silver investment should continue to comfortably absorb this surplus.