Silver News

Silver Shows Strength in 2002 Despite Poor Global Economy - Demand Outstrips Supply for 14th Year

Despite an ailing world economy, the price of silver showed strength in 2002 and recorded a 5 percent year-on-year increase, according to the World Silver Survey 2003, published by the Silver Institute.

The average silver price in 2002 was US$4.60 per ounce and trending higher so far this year, posting a cumulative average of US$4.66 per ounce during first quarter 2003.

On the supply side, silver experienced its largest annual drop in mine output to 585.9 million ounces. There could be a further decline in mine production in 2003, as base metal producers are forecast to scale back output and no significant new capacity is expected to come on line. The global weakness in base metals prices contributed to a 3 percent reduction in silver as a byproduct of lead and zinc production. Silver as a byproduct of copper mining declined 1 percent, according to the Survey.

Mexico retained its title as the world’s largest silver producer, followed by Peru, Australia, the United States and China.

On the demand side, a 9 percent drop in jewelry and silverware offtake, mainly due to a drop in Indian demand, contributed to a 3.5 percent drop in global fabrication to 838.3 million ounces. If the Indian anomaly is excluded from the overall picture, total silver fabrication would have risen 1 percent. The drop in silver demand in India is pegged to a 7 percent rise in the Indian Rupee and a poor year for farmers.

In contrast to India, North American demand grew 5 percent and East Asian demand grew 3 percent.

Industrial uses of silver, the largest fabrication sector — 41 percent of total demand — grew by 1.3 percent in 2002 to 342.4 million ounces. Electrical and electronics applications saw a rebound last year, consuming nearly 141.0 million ounces, compared to 133.2 in 2001. Brazing alloys and solders also experienced a growth in demand from 36.0 million ounces in 2001 to 37.5 million ounces in 2002.

Bullion coin fabrication was impressive with U.S. consumption rising to a record 14.2 million ounces in 2002, a nearly 15 percent increase over the previous year. Globally, silver coin and medal consumption registered a 2.6 percent increase in 2002. The U.S. Mint is now buying silver on the open market, having exhausted its defense stockpile last year.

For the 14th straight year, demand outstripped conventional supply. This gap between fabrication demand and conventional supply (mine production and recycled scrap) stood at 67.4 million ounces in 2002.

The Survey forecast that new uses of silver will lead to increased offtake. These uses include fuel cells, silver-based wood preservatives and superconductivity.

The 2003 edition of the World Silver Survey was independently researched and compiled by London-based Gold Fields Mineral Services Ltd., the precious metals research company. It was sponsored by 17 companies and organizations engaged in the global silver industry from North and South America, Europe and Asia. The Silver Institute has published this annual report since 1990.

Copies of World Silver Survey 2003 may be purchased for US$175 from The Silver Institute, 1200 G Street, NW, Suite 800, Washington, DC 20005, 202/835-0185; fax 202/835-0155, or at www.silverinstitute.org.

Silver News - Second Quarter 2003