Silver prices will slip further this year despite growing concerns about the health of the global economy, according to CPM Group.
The metal will average US$15.02/oz in 2019, down from US$15.71/oz last year, which was 8.5% lower than US$17.16/oz in 2017, CPM managing partner Jeffrey Christian said at the launch of the group’s 2019 Silver Yearbook report.
Rising nationalism and the breakdown of international cooperation, coupled with high debt levels in the US, are causing a “tremendous amount of discomfort” among investors, Christian said.
But these issues are unlikely to come to a head this year, with the US seen avoiding recession and only a mild slowing in growth in China and other economies, he added.
“Investors are well aware of the problems but have also done a good job of assessing the fact that while problems are there and are growing larger and more problematic year after year, they probably won’t come home to roost in 2019 or even 2020, but at some point there will be a day of reckoning,” Christian told the event.
Silver will trade in the US$14.50-US$16.20/oz range this year or possibly a little lower during the seasonally weak Q2-Q3, he added.
Net investment demand for silver fell to a 13-year low of 21.5Moz in 2018, with a further decline expected in 2019, CPM’s VP research, Rohit Savant, told the event.
Fabrication demand hit a record 926Moz in 2018, up 1% from the previous year, with the jewelry and electronics markets the main drivers.
Consumption in the solar panels industry also hit a high of 99.5Moz last year but growth has slowed.
“In 2019 we expect silver fabrication demand to remain at these elevated levels but not to rise in any significant way,” Savant said.
Total silver supply fell 2.3% to 948Moz in 2018, with mine supply dropping 2.6% to 832Moz and a smaller decline in secondary supply.
Mine supply is down from the record 1.030Boz in 2016, with the fall due to prolonged price weakness, a lack of new silver projects coming on stream and shutdowns and suspensions of existing operations, Savant said.
The latter includes the ongoing suspension of the Escobal mine in Guatemala, which began in mid-2017. The mine, acquired by Pan American Silver in its 2019 takeover of Tahoe Resources, previously produced about 20Moz/y silver.
New mine capacity coming on stream in 2018 was 5Moz, down 43%, and far below the peak of 35Moz in 2013. A further drop to 3.5Moz of new capacity is forecast for 2019.