Demand and Supply in 2007

Demand

Total global silver fabrication grew 1 percent in 2007 to 843.7 Moz. Most notably, industrial applications, a key constituent of the overall demand complex, posted an impressive 7 percent gain to 455.3 Moz, recording the sixth consecutive year of growth in this category. In fact, in the period since the technology related slump in 2001, industrial applications have added an impressive 120.1 Moz to silver demand. A key factor behind the increase last year was the more than 6 percent rise in the electrical and electronics sector, which broke the 200 Moz mark for the first time. India, China and the United States accounted for 70 percent of the world rise in all industrial uses, while Germany, Italy and France also posted gains. Total industrial demand reached 54 percent of total global silver fabrication demand in 2007.

Jewelry fabrication coped well with high and volatile silver prices, slipping by only 2 percent in 2007, the product of weaker offtake in Europe and the Indian Sub-Continent, which offset growth in East Asia, where Chinese jewelry fabrication grew by a noteworthy 13 percent in 2007. Silverware demand fell by a modest 4 percent in 2007 to 58.8 Moz, as losses in India, Europe and Mexico were partially countered by gains for Russia and China.

Photographic demand continued to decrease, falling by 11 percent in 2007 to 128.3 Moz. The bulk of the decline was accounted for by lower consumer demand for color film, this sector being most affected by further inroads from digital photography

World Silver Demand

Supply

Global silver mine production rose by 4 percent in 2007, with particularly solid gains from Chile, China and Mexico. Total silver mine production reached 670.6 Moz last year. Peru was the world’s biggest silver mining country in 2007, followed in the rankings by Mexico, China, Chile and Australia. Last year, silver generated at primary mines drove global totals higher, increasing by 11 percent to account for 30 percent of all silver mined. Cash costs at primary silver mines rose to a weighted average of US$1.52 per ounce, driven by a combination of labor, consumables and energy cost rises.

The net supply of silver from above-ground stocks dropped by 8 percent in 2007 to 173.1 Moz. The decline was mainly the product of lower net government sales and rising producer de-hedging, although scrap supply was also trimmed. De-hedging reduced the overall producer hedge position by a sizable 30 percent last year, the global book declining by 25.0 Moz. Despite higher silver prices, scrap volumes fell in 2007 by 3 percent, to 181.6 Moz, the result of falling Indian recycling with the rest of the world virtually flat on a net basis. Net government sales took a steep downturn in 2007, plummeting by 46 percent to 42.3 Moz. The decline was the result of two major sellers in 2006, namely China and India, being essentially absent in 2007. In contrast, Russian government sales, which comprised the bulk of net sales in 2006, rose, partly offsetting the others’ declines.

World Silver Supply and Demand

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.