Silver Remains Strong in 2012

on Jun 1, 2012
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New York-based CPM Group says that total silver supply may surpass the one billion ounces mark this year, with silver mine production possibly hitting 729 million ounces. Silver producers have been stimulated by increases in silver prices and this may lead to breaking last year’s record of 713.6 million ounces of silver produced.

2011 was a landmark year for the silver mine industry, as silver production saw the 700-million ounces mark broken for the first time in history. Projections made in CPM’s Silver Yearbook 2012 show that 2012 could be even more successful for the industry, as production may hit 729 million ounces of silver, a 15.4 million ounces increase. According to the report, one of the reasons for increased production is silver price increase, which has had a positive impact on silver producers.

Increased production will lead to increase in total silver supply too. Following nine-years of constant output rises, total silver supply is forecast to reach 1.01 billion ounces this year, which would be another landmark achievement for the industry. In 2011 silver supply rose to 995.1 million ounces, coming just a few million ounces short of breaking the one billion threshold.

Both silver fabrication and investment demand have also increased. In 2011, fabrication demand rose 2.2% to 861.9 million ounces and one of the reasons behind the increase was the photovoltaic industry, which alone has used 58.9 million ounces. A slight decrease of the demand from the solar panel industry is expected this year though, “driven by a reduction in demand for new solar panels from Europe and a large supply overhang due to excess production by China,” said the report.!m[](/uploads/story/14/thumbs/silver_bars_inline.png)

Electronics is another sector, where silver has many implications. In fact, it’s the second largest silver user, only behind jewelry. Its excellent electrical conductivity makes silver widely used in electronic items. Demand from the electronics sector reached 221.8 million ounces in 211, an increase of 9.1 million on the previous year.
Jewelry remains strong, with predictions estimating a demand of 296.1 million ounces in 2012. Other sectors like medical, cosmetics and hygiene will also see increases in demand this year. The total demand of silver for fabrication purposes is forecast to reach 879.1 million ounces. According to CPM, “the main drive of growth during 2012 is expected to be the electronics sector”.

As for investments, demand was strong in 2011 and the report forecasts that this trend will continue in 2012, as investors are most likely to continue buying large volumes of silver. Estimations show that last year investors added 133.2 million ounces of silver to their holdings. Somewhere in those lines are the projections for 2012 – net investment demand will most likely be around 131.7 million ounces, which will be a 1.7 percent decrease from 2011.
The world’s biggest emerging markets – India and China – will behave differently in terms of silver demand for 2012. India’s demand is most likely to be flat on the levels of 2011, while on Chinese markets, investment demand rises rapidly.

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