Silver production

7/29/2019 Silver production

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NATIONALMULTICOMMODITY

EXCHANGEOFINDIALIMITED

ReportonSilver

4thFloorH. K.House,

B/hJivabhai Chambers, AshramRoad,

Ahmedabad, Gujarat380009INDIA

Phone:9179 40086039 Fax:9179 40086040

Email: [email protected]:www.nmce.com
mailto:[email protected]://www.nmce.com/http://www.nmce.com/http://www.nmce.com/mailto:[email protected]


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TableofContents

Introduction .................................................................................................................................. 3

Uses ................................................................................................................................................ 3

Supply ............................................................................................................................................ 4

Demand ......................................................................................................................................... 7

ImportExport ............................................................................................................................. 10

SilverPrices ................................................................................................................................. 12


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Introduction

Most of the worlds silver is mined in the US, Australia, Mexico, Peru, and Canada.

Silveroreismostoftenfoundincombinationwithotherelements,andsilverhasbeen

minedandtreasuredlongerthananyoftheotherpreciousmetals.Mexicoistheworlds

leadingproducerofsilver,followedbyPeru,Canada,theUnitedStates,andAustralia.

The main consumer countries for silver are the United States, which is the worlds

largest consumer of silver, followedby Canada, Mexico, the United Kingdom, France,

Germany,Italy,JapanandIndia.Themainfactorsaffectingthesecountriesdemandfor

silver are macro economic factors such as Gross Domestic Product growth, Industrial

Production, income levels, and a whole host of other financial macro economic

indicators.

Uses

Demand for silver is built on three main pillars; industrial and decorative uses,

photographyandjewelry&silverware.Together,thesethreecategoriesrepresentmore

than95percentofannualsilverconsumption.

Why is this indispensable metalin such demand? The reasons are simple. Silver has a

number of unique properties including its strength, malleability and ductility, its

electrical and thermal conductivity, its sensitivity to and high reflectance of light and

theabilitytoendureextremetemperatureranges.Silversuniquepropertiesrestrictits

substitutioninmostapplications.

Silver is used extensively for industrial purposes due to its unique properties, such as

high electrical and thermal conductivity, malleability, ductility, and its resistance to

corrosion.Theelectronicsandphotographyindustriesarethemainconsumersofsilver,

assilverisanintegralcomponentinmostelectronicequipment,aswellasfilmandfilm

processingchemicals.Industrial uses of silver account for nearly 90% of the total use of silver in recent

history, with the remaining 10%being used for coinage andjewelry. Silver is used

heavily in the photographic industry in all areas from actual film used in cameras, to

plates, sensitized paper, as well as in all photocopying machines and most fax

machines.Silverisalsoinhighdemandfrombasicindustry.Almosteveryon/offswitch


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used in electrical equipment and appliances uses silver as a component. Silver is also

usedinsolderandbrazingalloytojoinmetallicsurfaces,aswellasinelectroplateand

sterlingproduction.

Silver is also used in the production ofbearings, as electroplated Silverbearings have

greater fatigue strength and load carrying capacity than any other type. Silver also

facilitatesthejoiningofmaterials(calledbrazing),producingaleakproof,andsmooth,

corrosionresistantjointinmanufacturedgoods. Silverisalsousedasacatalystinthe

production of formaldehyde, which has production estimated at 15billion pounds a

year. Formaldehyde is an essential ingredient in the production of adhesives,

laminates,finishesforpaperandtextiles,surfacecoatings,includingpaints,dinnerware

andbuttons,packagingmaterialsandmuchmore. Silverisalsousedintheproduction

ofMylarrecordingtapes,whichmakesup100%oftherecordingtapessoldtoday. Anestimated23millionouncesofSilverareuseddailyinthecatalyticoxidationprocesses

describedabove.

USES

BATTERIES ELECTROPLATING

BEARING JEWELARY&SILVERWARE

MEDICALAPPLICATIONS BRAZING&SOLDERING

CATALYSISTS MIRRORS&COATINGS

COINS PHOTOGRAPHY

ELECTRICAL SOLARENERGY

ELECTRONICS WATERPURIFICATION

Supply

The main supply of silver comes from mine production, scrap operations, and

hoarding. Approximately seventy percent of the silver mined in the westernhemisphere is mined as abyproduct of other metal products, such as gold, copper,

nickel, lead, and zinc. As such, the price of these metals greatly affects the supply of

silver mined in any year. As the price of the other metal products increases, the

increased profit margin to mine operations stimulates greater production of the other

metals,andasaresulttheproductionofsilverincreasesintandem.


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Silver is also mined directly. This is an importantbut smaller percent of the total

production of silver each year. Silver coming directly from silver mining operations

accountsforapproximately20%ofthesilverminedeachyear.

TheSupplyofSilverisbasedontwofacts,mineproductionandrecycledSilverscraps.

Mine production is surprisingly the largest component of silver supply. It normally

accounts for a little under 2/3 rd of the total (last year was slightly higher at 68%).

Fifteencountriesproduceroughly94percentoftheworldsSilverfrommines. Themost

notableproducersareMexico,Peru,theUnitedStates,CanadaandAustralia. Mexicois

thelargest producerofSilverfrom mines.Peru,ishoweverthe worldssecondlargest

producerofSilver. Silverisoftenminedasabyproductofotherbasemetaloperations,

which accounts for roughly fourfifths of the mined Silver supply produced annually.

Known reserves, or actual mine capacity, is fairly evenly split along the lines ofproduction.

The mine production is not the sole sourceothers being scrap, disinvestments,

governmentsalesandproducershedging.Scrapisthesilverthatreturnstothemarket

whenrecoveredfromexistingmanufacturedgoodsorwaste.Oldscrapnormallymakes

uparoundafifthofsupply.

Disinvestment

and

government

sales

are

similar

in

thatboth

comprise

return

to

the

marketofoldcoinsandbarsrespectivelybytheprivatesectororthegovernment.But

thesesourcesmaynotaddtosupplyeveryyearonanetbasis.

TheothermajorsourceofSilverisfromrefining,orscrapsrecycling. BecauseSilveris

usedinthephotographyindustry,aswellasbythechemicalindustry,theSilverused

insolventsandthelikecanberemovedfromthewasteandrecycled.TheUnitedStates

recyclesthemostSilverintheworld,accountingforroughly43.6millionounces. Japan

is the second largest producer of Silver from scrap and recycling, accounting for

roughly27.8milliontroyouncesin1997. IntheUnitedStatesandJapan,threequarters

of all the recycled Silver comes from the photographic scrap, mainly in the form of

spentfixersolutionsandoldXrayfilms.

Global silver production roseby 4 percent in 2007, with particularly solid gains from

Chile, China and Mexico. Total silver mine production reached 670.6 Moz last year.

Peruwastheworldsbiggestsilverminingcountryin2007,followedintherankingsby


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Mexico,China,ChileandAustralia.Lastyear,silvergeneratedatprimaryminesdrove

global totals higher, increasingby 11 percent to account for 30 percent of all silver

mined.

Top 20 Silver Produc ingCountrie sin 2007

(millions ofounces) 1. Peru 112.3

2. Mexico 99.2

3. Chi na 82.4

4. Chile 62.0

5. Australia 60.4

6. Poland 39.5

7. Russia 38.0

8. United States 37.3

9. Canada 28.5

10. Kazakhstan 22.7

11. Bolivia 16.9

12. Sweden 9.4

13. Argentina 8.5

14. Indonesi a 8.2

15. Turkey 7.5

16. Morocco 7.1

17. Iran 3.1


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18. Indi a 2.9

19. Guatemala 2.8

20.

Uzbekistan

2.8

(Source:SilverInstitute)

Demand


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Inrecentyears,themainworlddemandforsilverisnolongermonetary,butindustrial.

With the growing use of silver in photography and electronics, industrial demand for

silveraccountsforroughly85%ofthetotaldemandforsilver.

ThoughSilverhasalonganddistinguishedhistoryasbeingthemetalofcommerce,it

hasshiftedrolesinrecentyearstobemoreofanindustrialmetalthanapreciousmetal.

The singlelargestuseofSilverisforindustrialpurposes,withthe electronicsindustry

makingupthelionsshareofthisdemand. JewelryandSilverwareisthesecondlargest

component, with more demand from the flatware industry than from the jewelry

industryinrecentyears. ThephotographyindustryisalargeuserofSilver. Silverisan

important ingredient inboth the manufacturing of film, as well as in film processing.

Silvercoinageaccountsforonlyasmallportionofthedemandforsilverinrecentyears.

Silver is first and foremost an industrial metal. Silver components are found in

everything from light switches and circuitbreakers, to personal computers, stereos,

telephones,microwaveovensandautomobiles.

Jewelry and silverware demand hasbeen steadily decreasing as a percentage of total

use of Silver for many years, since manufacturing and electronics industrial uses of

Silverincrease.ThoughSilverisoftenthoughtofasapreciousmetal,inrecentyearsthe

fastestgrowingsegmentofdemandanduseforsilverhasbeenfromindustry,hencewe

tendto

view

Silver

as

more

of

an

industrial

metal

than

as

a

precious

metal.

India, the largest consumer of silver, is gearing up to start hallmarking of the white

precious metalby April. India annually consumes around 4,000 tonnes of silver, with

theruralareasaccountingforthebulkofthesales.

AccordingtoGFMS,totalglobalsilverfabricationgrew1percentin2007to843.7Moz.

Infact,intheperiodsincethetechnologyrelatedslumpin2001,industrialapplications

haveaddedanimpressive120.1Moztosilverdemand.Akeyfactorbehindtheincrease

lastyearwasthemorethan6percentriseintheelectricalandelectronicssector,which

brokethe200Mozmarkforthefirsttime.India,ChinaandtheUnitedStatesaccounted

for70percentoftheworldriseinallindustrialuses,whileGermany,ItalyandFrance

also posted gains. Total industrial demand reached 54 percent of total global silver


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fabrication demand in 2007.

Silverware demand fellby a modest 4 percent in 2007 to 58.8 Moz, as losses in India,

Europe and Mexico were partially countered by gains for Russia and China.

Photographicdemandcontinuedtodecrease,fallingby11percentin2007to128.3Moz.

Thebulk of the decline was accounted forby lower consumer demand for color film,

thissectorbeingmostaffectedbyfurtherinroadsfromdigitalphotography.

WorldSilverSupplyandDemand

(inmillionsofounces)

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Supply

MineProduction 542.2 556.9 591.0 606.2 593.6 600.6 621.1 653.8 647.4 670.6

NetGovernmentSales 33.5 97.2 60.3 63.0 60.3 88.4 60.2 67.5 78.2 42.3

OldSilverScrap 193.9 181.6 180.7 182.7 187.5 184.0 183.7 186.0 188.0 181.6

ProducerHedging 6.5 18.9 9.6 27.6

ImpliedNetDisinvestment 48.2 44.8 87.2 10.8

TotalSupply 824.3 880.4 919.1 870.4 852.2 872.9 874.6 925.0 913.7 894.5

Demand

Fabrication

IndustrialApplications 316.3 339.0 374.3 335.2 339.2 349.8 367.3 405.3 424.8 455.3

Photography 225.4 227.9 218.3 213.1 204.3 192.9 178.8 160.3 144.0 128.3

Jewelry 140.6 159.8 170.6 174.3 168.9 179.2 174.9 173.8 166.3 163.4

Silverware 114.2 108.6 96.4 106.1 83.5 83.9 67.3 67.8 61.2 58.8

Coins&

Medals

27.8

29.1

32.1

30.5

31.6

35.7

42.4

40.0

39.8

37.8

TotalFabrication 824.3 864.4 891.7 859.2 827.4 841.5 830.7 847.4 836.0 843.7

ProducerDeHedging 16.0 27.4 24.8 20.9 6.8 25.0

ImpliedNetInvestment 11.2 10.5 44.0 77.6 70.8 25.8

TotalDemand 824.3 880.4 919.1 870.4 852.2 872.9 874.6 925.0 913.7 894.5


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SilverPrice

(LondonUS$/oz)5.544 5.220 4.951 4.370 4.599 4.879 6.658 7.312 11.549 13.384

(Source:WorldSilverSurvey2008)

ImportExport

Ithasbeen one of thedeeprootedhabitsoftheIndianpeople tospend aconsiderable

part of their incomes every year for the purpose of gold and silver, partly as

unavoidableexpenditureontheoccasionofmarriageandothersocialceremonies,and

partly

asa

safe

method

of

investing

their

savings.

Further,

as

India

produces

only

a

smallquantityofgoldandpracticallynosilveratall,thesepreciousmetalshavealways

beenimportedformonetaryaswellasnonmonetarypurposes.

The worlds output of silver during 1493 to 1932 was estimated at 15,486 million fine

ounces, out of which an amount of 3,000 million ounces was lost or destroyed, an

amount of 4,940 million ounces was added to the monetary stock, and the rest

amounting to 7,546 million ounces was added to the nonmonetary stock. The Indian

share

of

the

monetary

stock

amounted

to

1,119

million

ounces

or

22.7

per

cent,

and

of

thenonmonetarystockto3,300millionouncesor43.6percent.Theofficialstatisticsfor

annualimportsoftreasure(i.e.silvercoinandbullion,andgoldcoinandbullion)and

of merchandise shows that the ratio of the imports of precious metals to that of

merchandiseremainedpracticallyunchangedduringtheperiod1879to1929.Thesteep

fall in the imports of precious metals during the period ending with 1898 to 1899 was

due to the disastrous effects of famines and epidemics during the period. The

spectacularriseinthedemandforimportsinthedecadeprecedingtheFirstWorldWar

was due to a great increase in monetary demand for precious metals. Another

noteworthy feature of these imports is that the relative importance of silver and gold

importshad considerably changed since1900, thedemand forgold rising relativelyto

thatofsilver.


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Large proportion of silver imports had alwaysbeen used for coinage of silver rupees,

anda

considerable

proportion

of

gold

imports

during

the

period

of

the

Gold

Exchange

Standard in India, 1898 to 1914, were similarly used for monetary purposes. The

distinctionbetweenmonetaryandnonmonetarytransactionsingoldandsilverisbasic

for an analysis of the external aspects ofthe Indian economy,because the transactions

in monetary gold and silver constitute accommodating transactions in thebalance of

payments,whiletherestofthetransactionsinthetwopreciousmetalsareautonomous.

FortheperiodunderconsiderationtheofficialstatisticsofIndiagivedataseparatelyfor

the imports and exports of gold and silver coin andbullion, and for trade onboth

privateandgovernmentaccount.

A surge in Indian silver demand during the second half of 1996 represents the years

mostdramaticincreaseinconsumption.Fortheyearasawhole,totalimportsthrough

Indias two official channels amounted to lust over 100 million ounces representing a

riseofmorethan30percentfromthe1995level.Theincreasewasduetoanumberof

factorsincludingtherisinglevelofconsumerdemandforsilverwarecoupledwithgood


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harvests, particularly in the Northern tribalbelts where heavyweight silverjewelry

remains the favored method of saving among rural populations. The rise in demand

wasnotsimplyapricerelatedphenomenon.Infact, theyears averagepriceroseby6

percent.Heexplained,however,thatthefallinthepriceduringthecourseoftheyear

helped accelerate the pace of imports which rose from 13 million ounces in the first

quartertoanewrecordlevelofalmost35millionouncesinthefourthquarter.

TheimportsofSilverhaverisenconsiderablytoalmostfourfoldsin2007ascompared

to2006.

SilverPrices

Because silver is a precious metal, its price is determinedby the supply and demand

ratioatanygivenmoment.Asisthecasewithotherpreciousmetals,thereisalimited

amount of silver in the world. It is not a product that canbe manufactured en masse,

and, therefore, is subject to issues such as weather and politics that may affect silver

miningoperations.


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Unlike the price of solid gold, silver prices were fairly stable throughout the decades

from1950 1970,however,therewasastrongupturninthelate70sthatlastedintothe

80s.Silverpriceswentfromaround$2toover$20andthenstartedtomovebackdown.

By1990,silverhaddroppedagaintoaround$5.

One of the reasons for the sudden decline in Silver prices from 1980s till now is the

declineinitsdemandasaninvestmentoptionbycustomers.However,accordingtothe

SilverInstitute,(2002Report)forthefirsttime,inovertenyearstherewasanincrease

in silver investment. Because silver canbe an important store of value. For example,

between 1971 and 1981, the U.S. dollar lost more than half of its value, while silver

pricesrosenearlyfivetimes.

ThePricesofSilverhadhitahighof20.65USDperOzintheyear1980.Afterthat,there

hasbeenadeclineinpricesofsilveroverthenext2decades.

The silver price in 2004 staged a dramatic rally, rising a robust 36 percent to average

$6.66perounce.Thiscomparedtoanaveragepriceof$4.85in2003.Thisstunningprice

performance reflects fundamental changes in silvers supply/demandbalance. In 2005,

the silver price experienced a 10 percent increase over the average 2004 price of $6.65

perounce,toanaverageof$7.31perounce.

In2006,

the

silver

price

experienced

a

58

percent

increase

over

the

average

2005

price

of

$7.31perounce.Thesilverpricereachedlevelsnotseenin26yearsandwastheleader

whencomparedwithgold(36percentincrease)andplatinum(27percentincrease).The

primary factor driving the stronger silver price was the continued strength of

investmentdemand,whichreturnedinearnestin2005,wassustainedin2006.

The annual silver price, ledby continued strong investor and industrial applications

demand,averagedanimpressiveUS$13.38in2007.Thisresultrepresenteda16percent

price increase over 2006, and on a percentagebasis was stronger than that enjoyedby

gold,platinumandpalladiumlastyear.Whenlookingatthe2007silverprice,thewhite

metalpostedaverysolidperformancetoaveragesnotseensince1980.


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Silver Price trend during1990-2007

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

1990

1992

1994

1996

1998

2000

2002

2004

2006

Prices(US$perOz)

(Source : www.s i lver ins t i tute .org)

Documents

Silver production