Silver News

Silver Demand Rises in 2003: World Silver Survey

Industrial use of silver increased nearly 3 percent to 351.2 million ounces in 2003, mainly due to an improving global economic environment, a resurgent electronics sector, and a dramatic 8-percent increase in Chinese fabrication, which last year consumed a record 27.6 million ounces of silver in industrial applications in that country, according to World Silver Survey 2004, released by the Silver Institute and GFMS Limited, the authors of the study.

Jewelry and silverware grew 4.1 percent to 276.7 million ounces from 2002’s fallen level, and coins showed greater strength, growing 7.5 percent to 35.3 million ounces. Photographic demand, however, saw further decline, falling 4.7 percent to 196.1 million ounces due to decreased worldwide tourism levels and inroads from digital cameras.

Total fabrication demand increased 1.6 percent in 2003 to 859.2 million ounces, and the 13.3 million ounces gained over 2002 represents a partial reversal of a two-year decline.

“The electronics segment accounted for much of the gain in 2003,” the Survey noted, “rising 4.9 percent to 147.2 million ounces. Most of these gains were to be found in East Asia with higher end use of its telecoms, IT and automotive industries.” The report added: “An important contributor to the industrial total’s solidarity was that Indian offtake held steady rather than suffering a slump as seen in 2002.”

On the supply side, mine production declined a slight 0.1 percent, or less than 1 million ounces, to 595.6 million ounces, with the biggest decline, 10 percent, seen in Australia, the world’s third largest producer. “Double-digit losses were also recorded in the United States, where lower grades, operational difficulties and closures adversely impacted output,” the Survey noted. “Mine closures also played a part in the 3 to 7 percent declines respectively measured in Mexico and Canada.” The biggest gains in mine production were recorded in Russia, Poland and Chile. Russia’s Dukat mine which opened in the 4th quarter of 2002 helped boost the country’s silver output 39 percent year-on-year. “Good growth was also recorded in Chile, last year’s sixth largest silver producer, where results were boosted by improved output at Coeur’s Cerro Bayo/Martha Mine, in its first full year of operation, and at copper mine Escondida.”

Scrap supply rose by 2.6 percent to 191.6 million ounces, and net official sector sales roles by 35 percent to 82.6 million ounces. The bulk of this supply came from China, which accounted for 69 percent of the 82.6 million ounces supplied to the market in this category. The Survey questions whether China’s silver trove is unlimited, and any diminution of sales, or a flexible policy with regard to price – as has become clear in recent months – would undoubtedly help silver’s cause.

Silver prices ended the year on a happy note, achieving a high of US$5.965 on the last trading day and recording a 26 percent intra-year gain. Much of the gain came at year’s end and continues into 2004.

For 2004, the Survey suggested that price will be pegged to fabrication, investment demand and government stock sales, but investment may be the most important single factor: “[I]nvestment will help support prices this year at levels above those they would otherwise revert to, basis the interplay of the other supply/demand variables alone,” according to the Survey. Already in the first six months of 2004, the silver price has averaged US$6.48 per ounce.

The 2004 edition of the World Silver Survey was independently researched and compiled by London-based GFMS Ltd., the precious metals research company. The Silver Institute has published this annual report on the global silver market since 1990, to bring reliable supply and demand statistics to market participants and the public at large.

The World Silver Survey 2004 is sponsored by 21 companies and organizations from North and South America, Europe and Asia. These firms are involved in nearly every aspect of the global silver industry, from mining and refining to trading and manufacturing.

Copies of World Silver Survey 2004 may be purchased for US$195 from The Silver Institute, 1200 G Street, NW, Suite 800, Washington, DC 20005, 202/835-0185; fax 202/835-0155, or from the Institute’s website at www.silverinstitute.org

Silver News - Third Quarter 2004