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    Silver Proves Resilient as Adverse Global Economic Conditions Dominated 2002 - Silver Price 5% Higher Year-on-Year
    May 08, 2003

    NEW YORK (May 8, 2003) - In the face of an enduring global economic slowdown, the silver price demonstrated resilience in 2002, according to the World Silver Survey 2003, released here today by the Silver Institute. With an average price of $4.60 per ounce in 2002, silver recorded a 5-percent year-on-year increase. When compared with copper, lead and zinc prices, which fell by 1, 5 and 12 percent respectively, silver retained its characteristics as a precious metal, rising in value during periods of crisis last year. The silver price is trending even higher in 2003, posting a cumulative average of $4.66 per ounce in the first quarter.

    Posting the largest annual drop since 1994, global silver mine output declined to 585.9 million ounces (Moz) in 2002. The Survey states that there could be a further decline in mine production in 2003, as base metal producers are forecast to scale back output and no significant new capacity is expected to come online. Weaker global base metals prices contributed to a 3-percent reduction in silver production from lead and zinc mines and a further 1-percent decline in silver output from copper mines. Mexico again mined the most silver last year, followed by Peru, Australia, the United States and China. Silver from primary mines generated 27 percent of total mined silver last year, up from 25 percent in 2001. Average cash costs declined 23 percent from 2001 figures, to reach $2.31 per ounce.

    For the fourteenth straight year, a structural deficit was recorded. This gap between fabrication demand and conventional supply (mine production and recycled scrap) stood at 67.4 Moz in 2002.

    World Silver Supply and Demand (Million ounces)
    (Totals may not add due to rounding)
    Supply 2001 2002
    Mine Production 589.2 585.9
    Net Government Sales 87.2 71.3
    Old Silver Scrap 182.7 184.9
    Producer Hedging 18.9 -
    Implied Net Disinvestment - 20.9
    Total Supply 878.0 863.0

    Demand 2001 2002
    Industrial Applications 338.1 342.4
    Photography 213.9 205.3
    Jewelry & Silverware 286.0 259.2
    Coins and Medals 30.5 31.3
    Total Fabrication 868.5 838.2
    Net Gvernment Purchases - -
    Producer Hedging - 24.8
    Implied Net Disinvestment 9.5 -
    Total Demand 878.0 863.0


    According to the Survey, a modest 3.5-percent fall in total fabrication demand to 838.2 Moz in 2002 can be attributed to a 9-percent drop in jewelry and silverware offtake, which was overwhelmingly due to a slump in Indian demand. In fact, if India were excluded from the global demand picture, total silver fabrication actually rose last year by 1-percent. Principal among the factors causing lower Indian silver demand was the 7-percent rise in the Indian rupee, and a severely poor year for its farmers. In contrast to India, 2002 fabrication demand grew by 5-percent in North America and 3-percent in East Asia. The Indian outlook in 2003 should improve, as India's fabrication demand is up strongly over the past few months.

    Industrial use of silver is the largest component of silver fabrication demand, with silver being utilized in a wide range of products. Industrial demand grew in 2002 by 1.3-percent to 342.4 Moz, representing 41 percent of total fabrication demand. Electrical and electronics applications enjoyed a rebound last year, consuming nearly 141.0 Moz, compared to 133.2 in 2001. Brazing alloys and solders are other important industrial uses of silver, and this sector also experienced a growth in demand from 36.0 Moz in 2001, to 37.5 Moz in 2002.

    Demand for silver-bearing photographic products was 4-percent lower in 2002, in large measure from the sluggish world economy and reduced travel due to continuing terrorism fears. The above-mentioned reasons for the lower photographic offtake, depressed the demand for paper, and especially film from the consumer sector, contributing to the lower offtake.

    Jewelry consumption was robust in many regions in 2002, driven by a strong performance at the retail level. In part, silver jewelry demand benefited from the popularity of the "white look," particularly among younger consumers. The jewelry and silverware sector in Turkey witnessed a striking 26-percent increase in 2002 and Mexico's fabrication in this area recovered quite strongly as well, at 9 percent over 2001 figures. Moreover, the United States' jewelry and silverware silver offtake regained the ground that was lost in 2001, rising 5-percent in 2002. China is emerging as one of the world's largest fabricators of silver jewelry. Chinese output has grown strongly since the mid 1990s, taking advantage of the mainland's low-cost base and the jewelry making expertise available within certain regions. On the whole, jewelry and silverware fabrication demand experienced a 9-percent slip in 2002 to 259.2 Moz, primarily due to a 28-percent decrease in Indian jewelry and silverware demand.

    United States bullion coin fabrication, which rose to a record level of 14.2 Moz, representing a nearly 15- percent increase over 2001, paved the way for a 2.6-percent global rise in output of silver coins and medals in 2002. Gains were also posted last year in China, France, Austria, Thailand, CIS, Netherlands, Canada and Poland. Of particular note, the United States Mint is now in the open market to purchase silver for its coinage programs. This is a result of it exhausting the U.S. Defense Logistics Agency silver stockpile during the course of 2002.

    Regarding potential new uses of silver, which would lead to increased silver offtake in future years, the Survey highlights several possible growth opportunities. Fuel cells, silver-based wood preservatives, and superconductivity, are some of the innovative potential new uses for silver.

    Supply from above-ground stocks of bullion and recycled fabricated products (scrap silver) fell by nearly 27.0 Moz to reach 252.0 Moz in 2002. Of particular note, government sales fell sharply, from 87.2 Moz in 2001, to 71.3 Moz in 2002. Chinese sales totaled 51.0 Moz, significantly lower than the 68 Moz recorded in 2001. If the current Chinese sales level were maintained in the future, it is estimated by GFMS that their government stocks would be exhausted by the end of 2006.

    The 2003 edition of the World Silver Survey was independently researched and compiled by London-based Gold Fields Mineral Services Ltd., the precious metals research company. The Silver Institute has published this annual report on the global silver market since 1990, to bring reliable supply and demand statistics to market participants and the public at large.

    Founded in 1971, the Silver Institute is an international industry association. Its members include the leading primary silver producers, the industry's premier refining companies, manufacturers, dealers and bullion banks.

    The World Silver Survey 2002 was sponsored by 17 companies and organizations from North and South America, Europe and Asia. These firms are involved in nearly every aspect of the global silver industry, from mining and refining to trading and manufacturing.

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