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Silver demand down : Mine supply marginally up : Silver Institute Interim Report 2015

2,181 views · Published 18 November 2015 · 6:26 · Indexed 7 October 2026

Channel: The 2% Brief · 2015 · People & Blogs

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Silver demand down :  Mine supply marginally up :  Silver Institute Interim Report 2015

Today is Tuesday 18th November 2015 and we are covering the Silver Institutes 2015 Interim Silver Report produced by Thomson Reuters GFMS which was released today.

We shall deal with each aspect as the Report does:

Demand:

Weakening growth in China will continue to weigh on physical demand

• The growth seen in coin demand is not expected to repeat next year, at least to the extent seen in 2015
• Jewelry fabrication is expected to recover, but will largely hinge on consumption in China
• The continued shift towards smaller mobile devices and away from larger desktop computers will remain intact, weighing on electronics demand growth in the medium term.

Supply:

It’s estimated that mine supply peaked in 2015 and will trend lower for the foreseeable future

• Supply from scrap is expected to stabilize around 2015 levels in the medium term
• The hedge book remains at low levels and hedging is not forecast to return to the market in strength
• Government sales are not expected to be a feature of the market in the years ahead
• Declining total supply is expected to be a key driver of annual deficits in the silver market going forward

Price Outlook:

The slowdown in China’s economy has had a significant impact on silver offtake in 2015, a theme expected to persist in 2016, albeit to a lesser extent.

• While coin demand is expected to remain elevated in 2016, it may not hit fresh record highs.
• Mine supply is expected to decline in the long run and 2016 will be the beginning of this protracted decline.
• Scrap levels are expected to stabilize.
• Above ground stock levels are expected to dwindle going forward, amid a shortfall of supply against physical demand. This will provide support to prices in the long run.

So what does this all mean? Well the Survey predicts a 2015 silver physical deficit of 42.7 million oz, despite an envisaged mine production increase of 0.3% over last year and total physical demand expecting to fall by 2.5% in 2015 mainly driven by ‘consumer electronics miniaturization’ as well as a weaker economy in China. The Institute forecasts average silver prices to stand at $15.51 for the full calendar year an 18% decline from 2014.

So as we predicted over 6 months ago, mine supply is likely to be up albeit a small amount in 2015 and physical demand down compared to 2014.  Interestingly the Report shows that above ground stocks exceed 2 billion ounces and with a deficit of just 42.7 million, this is more than adequately catered for.

So what is our conclusion from this, providing of course the survey is accurate and we have little reason to suggest that it isn’t. Well for a start it shows that there is absolutely no ‘fundamental reason’ for prices to rise significantly for some time yet, and short term a slight decline may still be envisaged especially if China’s demand continues to weaken and the dollar gains additional strength. It is good news however for prices in the medium to long term as the deficit continues and a number of uneconomic mines are ‘shaken out’ of the Industry.

What this reveals to us at any rate is what we have been saying since we began this channel; based on fundamentals there is time for those so minded, to continue to stack silver at a sensible pace, and not be harried by those ‘pumpers’ telling you it’s about to rise to $100 any time soon – black swans materialising - excepted.

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