Silver Demand & Supply Deficit Set For Biggest on Record

The Silver Institute just released their Interim Silver Market Review last week (produced by the worldwide authority on all things metal, Metals Focus) and it shows a massive surge in silver demand this year, up 16% to 1.21 billion oz, creating a new all-time record of demand and the biggest deficit in decades.  Today we share the key findings from the report.

• Global silver demand is expected to reach a new high of 1.21 billion ounces in 2022, up by 16% from 2021. Each key segment of demand, except photography, is set to post a new peak.
• Industrial demand is on course to grow to 539 million ounces (Moz). Developments such as ongoing vehicle electrification (despite sluggish vehicle sales), growing adoption of 5G technologies and government commitments to green infrastructure will have industrial demand overcome macro-economic headwinds and weaker consumer electronics demand.
• Physical investment in 2022 is on track to jump by 18% to 329 Moz, which would also be a new record. Support has come from investor fears of high inflation, the Russia-Ukraine war, recessionary concerns, mistrust in government, and buying on price dips. The rise was boosted further by a (near-doubling) of Indian demand, a recovery from a slump last year, with investors often taking advantage of lower rupee prices.
• Exchange-traded products, in contrast, are forecast to see the largest annual decline in holdings totalling 110 Moz, due in part to silver’s higher volatility than gold, which has made it more vulnerable to profit-taking. Institutional investors are expected to retain a bearish stance as real yields are likely to strengthen, encouraging further distance from the white metal. [As we discussed recently here]

You can see from the chart below the amount of silver withdrawn from ETF’s and futures (COMEX) depositories this year

• In 2022, mined silver production is expected to rise by 1% year-on-year to 830 Moz. Most notably output from Mexico and Chile will rise most significantly partially offsetting these rises will be lower output from major silver producers such as Peru, China, and Russia.
• Silver jewellery and silverware are set to surge by 29% and 72% respectively to 235 Moz and 73 Moz this year, mainly thanks to an unprecedented rebound in Indian demand. This has partly been driven by strong inventory replenishment ahead of the festive and wedding season, following heavy stock depletion in 2021.

Silver demand in India saw a near record of 1750 tonne in just September, just 2 months after the all time record of over 1800 tonne in July.

• The global silver market is forecast to record a second consecutive deficit this year. At 194 Moz, this will be a multi-decade high and four times the level seen in 2021.

Back in August when we interviewed Metals Focus Managing Director, Nikos Kavalis on Gold Silver Standard Insights, he flagged we have many more years yet of deficits in the silver market.  Speaking to him last week he maintained there are still at least 5 years (the extent of their forward projections) of silver deficit remaining.

The table below shows the extent of that current deficit (continuing from the start in 2021) and where its all going:

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