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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]7/29/2019 Silver production
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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)