Silver for long term race!

Bring earlier stage projects for Silver!

According to the World Silver Survey 2020 by Silver Institute, the main theme for mine output in the medium term is growth. This is partly due to a slight rise for mines already producing as operational improvements and expansions outweigh losses from grade decline and reserve depletion. We can also expect larger gains from new projects, both new primary silver projects (mainly in Mexico) and as a by-product.

To avoid losses in the longer term (four to five years out), investment will be required to bring earlier stage projects into production as these are needed to replace lost output from reserve depletion, in both primary silver projects and assets where silver is a by-product. 

In addition, disruption from industrial action will likely continue, as a major share of silver production comes from jurisdictions recently prone to disruption and there is little to suggest this trend will cease.

The outlook for recycling is mixed. Ever tighter waste legislation points to ongoing small gains in industrial scrap, but this will be offset by further losses in photographic scrap as the pool of old X-rays diminishes. There is little to suggest either structural gains or losses for jewelry or silverware scrap.

Looking beyond the Covid-19 crisis, there are underlying themes for demand that could emerge in the next few years. On the industrial side, a good example will be the eventual dominance for hybrid (including mild-hybrids) and battery electric vehicles. This matters as both have higher silver loadings than vehicles with an internal combustion engine.

PV demand however may soften as thrifting continues and the growth in installations slows. However, it is becoming more resilient as falling costs makes it less dependent on government subsidies (which can change rapidly) and as the geographical spread of installations widens. Other areas, such as 5G, are promising and many of silver’s established demand areas look solid. As such, industrial demand should offer enduring gains.

The future for jewelry looks mixed. There are positives, such as western consumption benefiting from continued growth in self-purchases in an ever more online and branded market place. Indian demand could also benefit from growing sales of 925 fashion jewelry.

However, the country’s rural demand, dominated by simple heavy pieces, could fade as India modernizes. The outlook for silverware is also mixed. All-important Indian demand could suffer due to pressure on the informal economy, but it would gain from a recovery in GDP growth and clear consumer interest in sterling silverware. At least the major losses in western demand are over. Similarly, photographic demand may fall further, but the bulk of the secular decline is now behind us.

Lastly, coin and bar purchases again face divergent forces. In India, the crackdown on the informal economy is not going away and a younger generation is often more interested in equities and, if they still want silver, ETPs. This generational change could also become more apparent in the US. Despite that, the strength of industrial demand and the mixed picture for other fields point to total demand trending higher in the longer run.