Silver demand seen outstripping supply in 2018
Silver demand will outstrip supply in 2018, partly as a result of growing industrial and jewelry consumption, according to the Silver Institute.
The metal will continue to play a role in major industries that are moving toward increased electrification, such as the automotive sector, the organization said in a release.
"Although silver is used in small quantities in some applications, the diversity is large, and the continued rising volumes of applications are expected to again have a positive impact on silver consumption from industrial products this year," it said.
In addition, silver demand from solar panel production is likely to set another record this year, lifted by demand from households, particularly in China.
The institute expects 4% growth in silver jewelry demand in 2018 following last year's 1% growth. Jewelry accounts for about 20% of total silver demand.
While coin demand almost halved to 73Moz in 2017, the institute expects some investment to flow back into the precious metals this year, benefiting silver bar and coin demand.
This will be driven by "expensive" equity and bonds coupled with weaker Bitcoin prices seen so far this year.
Silver ETF (exchange-traded fund) holdings hit a record 670Moz at end-2017. The Silver Institute expects a further 3% increase this year.
SUPPLY CONSTRAINTS
Global mine supply will be constrained in 2018 as a result of production disruptions in South America coupled with reduced capex among primary silver miners over the past five years, the organization said.
Mexico is the world's biggest silver producer, with Peru second.
"However, the strong recovery in base metal prices will provide some support to output in 2018, particularly from byproduct producers capitalizing on the trend," according to the institute.
Mine supply data is expected to show a 2% drop in 2017, following a 1% decline the previous year.
"The silver market balance (total supply less total demand) is expected to swing into a slight market deficit again this year with both supply and demand reaching above 1Boz," the institute said.
Silver closed down five cents at US$17.04/oz in London on Friday. The metal has averaged US$17.12/oz to date in 2018, up from US$16.16/oz in December.
Gold ended US$2.75 higher at US$1,334.95/oz, compared to its January average of US$1,323.93/oz, up from US$1,261.26/oz last month.
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