The global silver market is anticipated to face a physical deficit in 2024, marking the fourth consecutive year of such a situation, as demand is projected to outstrip supply slightly. A report presented by Philip Newman, managing director at Metals Focus, and Sarah Tomlinson, director of mine supply, during the Silver Institute’s Annual Silver Industry Dinner in New York in November has revealed critical insights into the trends influencing this market.
For 2024, demand for silver is expected to increase by 1% year-on-year (y/y), reaching approximately 1.21 billion ounces (oz). This increase is propelled by surging industrial demand and a rebound in the sales of jewelry and silverware. Conversely, mine supply is predicted to grow only marginally by the same percentage, limiting the ability of supply to keep pace with rising demand.
Newman highlighted that silver prices have seen a significant uptick this year, nearly approaching $35/oz for the first time since 2012. As of November 11, the price of silver had surged by an impressive 29% since the beginning of the year. This rise can be linked to a variety of factors, including investor optimism surrounding potential rate cuts from the U.S. Federal Reserve, periods of dollar weakness, and declining yields, all contributing to silver's growing appeal as an investment.
Industrial applications are poised to drive much of the increase in demand, with forecasts indicating a rise of 7% in 2024, pushing consumption to exceed 700 million oz for the first time. This growth is largely driven by trends in the green economy, particularly within the photovoltaic market, alongside increased requirements from the automotive industry due to advancements in vehicle technologies and electrification. Additionally, while sales of consumer electronics have struggled in the challenging macroeconomic landscape, the rapid adoption of artificial intelligence technologies has created an increasing need for upgrades and infrastructure investments, thereby supporting silver demand.
In the realm of jewelry and silverware, both segments are expected to expand by 5%, benefiting significantly from increased consumption in India. The United States is also projected to experience growth in jewelry demand, which will be supported by contributions from key Asian and European exporters.
However, the physical investment segment is forecast to decrease sharply, plummeting by 15% to reach a four-year low of 208 million oz. Most of this decline is anticipated in the United States, where sales of coins and bars are on track for a staggering 40% drop, making it the lowest level since 2019. In contrast, India is poised to see an uptick in bar and coin sales fuelled by optimistic price expectations and a reduction in import duties on silver bullion.
The report further forecasts that exchange-traded products (ETPs) are set for their first annual inflows in three years. Investor sentiment has been buoyed by silver’s breakout from range-bound trading, which saw global holdings reach their highest level since July 2022, rising by 8% or 78 million oz from the end of 2023.
Mined silver production globally is projected to increase by 1% in 2024, with total output reaching an estimated 837 million oz. Contributions from Mexico, Chile, and the USA are expected to outweigh declines from Peru, Argentina, and China, particularly as production in Mexico is forecasted to rise by 10 million oz, a 5% increase y/y, reaching a total of 209 million oz.
In recycling, a growth of 5% is expected for 2024, bringing recycled silver to a 12-year high. This increase is primarily driven by price-sensitive sectors, notably a spike in scrap from silverware in the West, while industrial recycling shows modest gains, primarily due to structural factors.
Overall, with a slight balance between demand and supply, the global silver market is set to continue experiencing a notable physical deficit, expected to remain at around 182 million oz in 2024, a figure consistent with the deficits observed in recent years and indicative of ongoing trends in the silver industry. The forecasts suggest this trend is likely to persist in the foreseeable future, according to Metals Focus.
Source: Noah Wire Services