Silver market deficit to widen in 2016 – report

JOHANNESBURG (miningweekly.com) – Global silver production is projected to fall in 2016 by as much as 5% year-on-year as output from more mature operations begins to decline and the lower-price environment provides little incentive for producers to invest in expanding capacity at existing operations, noted a report by specialist commodity analyst The Silver Institute on Thursday.

This would represent the first reduction in global silver mine production since 2002 and would likely continue through to 2019, forecast the report.

Scrap supply, which had been on the decline for several years, would also weaken further in 2016 owing to additional losses in photographic scrap, a depleted pool of near-market silverware, jewellery and coins, as well as slowed scrap flows from industrial sources.

Industrial scrap, such as electronics, cost more to recycle, while the current price environment weighed on the profitability of recovering silver from these end-of-life items, held the institute.

This, as demand for silver would likely rise, amid increased need for the metal in industrial applications, solar-energy projects, ethylene oxide production, as well as boosted investment appetite.

As a result, the silver market deficit was expected to widen in 2016, drawing down on aboveground stocks and driven by a strong contraction in supply.

The silver price was, meanwhile, expected to find solid ground this year, with prices up 3.7% month-on-month in January.

This price appreciation came on the back of increased safe-haven demand amid volatile and weakening equity markets across the globe.