Industrial demand for silver rose to a new record high in 2023, coming in at 654.4 million ounces (Moz).
The surge was fueled by significant advancements in green economy sectors, particularly photovoltaics (PV), where demand skyrocketed by 64 percent year-on-year to hit 195.3 Moz, surpassing previous estimates.
PV is included in the electrical and electronics segment, which experienced demand growth of 20 percent year-on-year.
According to the Silver Institute’s latest World Silver Survey, other green energy applications, such as power grid construction and automotive electrification, contributed to the overall increase in industrial demand.
“The deficit in the silver market helps to provide robust support and a strong floor for the price,” said Philip Newman, managing director at Metals Focus, which produces the annual survey. “The deficit fell by 30 percent last year, but in absolute terms — at 184.3 million ounces — it was still eye-watering. Global supply has been broadly steady at around the 1-billion-ounce mark, while industrial demand did incredibly well with 11 percent growth,” he added.
Despite an overall 7 percent decline in total silver demand to 1,195 Moz in 2023, industrial demand emerged as the standout category, offsetting losses in the physical investment, jewelry and silverware sectors.
Notably, Chinese industrial demand surged by 44 percent to 261.2 Moz, primarily driven by PV production expansion.
Silver recycling, which accounted for 18 percent of total supply in 2023, saw a modest 1 percent increase to 178.6 Moz, mainly driven by growth in the recycling of ethylene oxide catalysts.
Looking ahead, Metals Focus forecasts 2 percent growth in total silver demand for 2024, with industrial fabrication expected to reach another all-time high, driven by a projected 20 percent gain in the PV market.
However, physical investment in silver bars and coins is anticipated to contract by 13 percent.
Silver mine supply to remain flat in 2024
In terms of global mine production, Metals Focus notes that in 2023 it witnessed a slight decrease of 1 percent to 830.5 Moz. This fall was influenced by the four month suspension of operations at Newmont’s (TSX:NGT,NYSE:NEM) Peñasquito mine in Mexico due to strike action among workers.
Additionally, lower ore grades and mine closures affected production in countries like Argentina, Australia and Russia. However, increased supply from Chile and Bolivia partially offset these losses.
The report forecasts a marginal 0.8 percent decline in global silver mine production to 823.5 Moz in 2024. Recovery is anticipated in Mexico as Peñasquito resumes full production post-strike action.
Expansions and new projects in the US, Morocco and elsewhere are expected to contribute to supply growth.
Offsetting these increases, a significant drop in production is expected in Peru due to operational issues, while China is anticipated to experience a decline in silver by-product supply alongside decreasing lead and zinc production.
Silver recycling, which hit a 10 year high in 2023, is forecast to remain nearly flat in 2024. Industrial scrap is expected to grow, driven by factors like higher receipts from ethylene oxide recycling. However, declines in other segments such as jewelry and silverware scrap, along with a further decrease in photographic scrap, are likely to offset these gains.
Overall, silver supply is seen coming in at 1,010.7 Moz in 2023 versus 1,015.4 Moz in 2022.
Silver market headed for second largest deficit
Overall, the silver market is expected to witness another substantial deficit in 2024, amounting to 215.3 Moz. According to Metals Focus, that would be the second highest in over 20 years.
While near-term price weakness remains a possibility for silver due to speculative inflows into gold and short-term downside risks, the outlook for the second half of the year is positive, driven by expectations of looser US monetary policy and sustained investor interest in precious metals.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.