Demand and Supply in 2006

Demand
Total global silver fabrication dipped by a little under 1 percent in 2006 to 840.5 Moz, in spite of a trend toward significantly higher and more volatile silver prices. Most notably, industrial applications, a key component of the demand complex, posted a 6 percent gain to 430.0 Moz, recording the fifth consecutive year of growth in this category. China posted strong industrial demand growth at 10.4 percent, and Japan recorded an equally impressive 10 percent increase in 2006. Last year represented a record for the United States with respect to total industrial silver use, posting a 6 percent increase to 106.8 Moz. Total industrial demand exceeded 50 percent of total global fabrication demand for the first time in 2006.

Jewelry fabrication posted a nearly 5 percent loss in 2006, largely due to price-related losses in India. Indonesian and Chinese jewelry fabrication, however, grew by an impressive 18 and 16 percent. Lower fabrication in price sensitive countries and structural taste shifts accounted for the 7.5 Moz dip in global silverware demand in 2006. About 60 percent of the silverware decline was due to India, where the price rise was evident in rupee terms.

Photographic demand continued to fall, decreasing by 10 percent in 2006 to 145.8 Moz. The bulk of the decline was the result of lower consumer film demand due to growth of digital imaging technology.

World Silver Demand

Global silver mine production edged up fractionally in 2006, with notable gains in Latin America and Asia. Total silver mine production reached 646.1 Moz last year, with Peru, Mexico, China, Australia and Chile the top five silver mining countries. Last year, silver generated at primary mines fell by 10 percent to 161.4 Moz, representing 25 percent of global silver production. Cash costs at primary silver mines contracted last year by 16 percent to average US$2.74 per ounce.

The supply of silver from above-ground stocks on a net basis dropped by 4 percent in 2006 to 194.4 Moz. The decline was the result of a shift of net producer hedging to the demand side. Total scrap supply provided the market with 188.0 Moz of silver in 2006, virtually unchanged from 2005.

To document these and other market fundamentals, each year the Silver Institute works with GFMS Limited, of London, a leading research company, to prepare and publish an annual report of worldwide silver supply and demand trends, with special emphasis on key markets and regions. This annual survey also includes current information on prices and leasing rates, mine production, investment and fabrication.

To learn more about the general production and uses of silver, please see our Production and Uses pages. For articles related to supply and demand, see the Silver News archives' subject index.