Global demand for silver in 2021 may reach an eight-year high of 1.025 billion ounces (31.9 thousand tons), as its main industrial consumers are activated amid an improving macroeconomic situation, experts from Metals Focus say.
By the end of 2020, Metals Focus expects a decline in global demand for silver by 3% to 963 million ounces, and supply – by 4% to 978 million ounces.
Overall, the Silver Institute and Metals Focus remain healthy optimism about the outlook for silver this year.
Physical purchases of silver bullion coins and bars in 2021 will hit a six-year high of 257 Moz as investors continue to add silver to their portfolios.
However, if the global recovery of the economy hit by the pandemic is slower than forecasted, this will lead to pressure on base metals, and in turn, may provoke investors to reduce their silver holdings.
The recovery in silver prices seen in 2019 continued into 2020. As a result, the average annual price of the metal increased by 27% – from $ 16.19 an ounce in 2019 to $ 20.52 in 2020.
With the onset of the COVID-19 pandemic, state-owned banks have been pursuing loose monetary policies that have lowered real interest rates and, along with a turn in favor of safe assets, encouraged investors to buy silver and other precious metals.
Bullish sentiment for silver was noted in early 2021 as well. In early February, retail investors’ ravenous appetite for silver, fueled by social media, pushed the price to an eight-year high of $ 31.10 an ounce, while the gold / silver ratio fell to 62, a seven-year low.
Overall, the gold / silver ratio is expected to fall to around 68 in 2021 from an annual average of 86 in 2020. This will be remarkable given that the ratio reached a record daily high of 127 in March 2020, experts emphasize.
The outlook for the price of silver in 2021 remains extremely positive, with the average annual price expected to rise 46% to a seven-year high of $ 30 / oz.
“Given the smaller silver market and the increased price volatility it can generate, we expect silver to comfortably outperform gold this year,” the survey said.
The global stocks of metal in ETP by the end of 2020 rose by an impressive 331 Moz to 1.04 billion ounces, and continue to grow. So, from the beginning of 2021, by February 3, ETP reserves increased by another 137.6 million ounces to a new record of 1.18 billion ounces.
Further growth in physical investment is also expected this year, which could surpass the six-year high of 257 Moz but is unlikely to break the 2015 record of 300 Moz.
This forecast is based on the current state of the US market, which has shown a stable positive trend since the beginning of 2021, causing a shortage of products, and most likely this growth will compensate for the relatively weak Indian market.
The overall global forecast for 2021 assumes an eight-year high of 1.025 billion ounces. This reflects the expected recovery in silver consumption across all segments of industrial, jewelry, and physical demand.
The industry is expected to increase its silver consumption to 510 Moz, a four-year high, up 9% from 2020. “Demand from electrical and electronic engineering is likely to provide most of the growth,” the survey notes. A significant share will be provided by the growing penetration of 5G technology in consumer electronics, where growth will be 7% – up to 300 million ounces compared to 2020.
In the second half of 2020, demand for silver in solar PV has shown a strong recovery, and this momentum should continue. The total volume of the sector is projected to be 105 Moz in 2021, well above last year’s data. And while the use of silver per unit continues to decline, the sector will benefit from the widespread adoption of photovoltaic technology in new countries that did not previously have such capacity.
The use of silver in the automotive industry is also set to skyrocket in 2021, to just over 60 million ounces, thanks to the growing electrification of vehicles.
Global jewelry demand will rise to 174 million ounces, but will fall below pre-COVID-19 levels. To a large extent, this reflects a moderate recovery in the Indian market, where demand will be constrained by high and volatile silver rupee prices. A similar picture is expected for silverware. Although total silverware production this year will grow at double-digit percentages to reach 45 million ounces, global production will be well below 2019 due to problems in India.
The prospects here are encouraging. Primary silver production is set to rebound and grow double-digit from pandemic-hit 2020 levels to 866 Moz, the highest since 2016. Most of the mines hit by the COVID restrictions have resumed operations, and power is also recovering from strikes. The increase will also be supported by high production volumes from recently launched new projects in Mexico and Australia.
The supply of silver scrap is expected to grow for the fifth consecutive year, in part due to high prices for gold and silver, which will stimulate industrial processing. For this reason, the population will also scrap silver jewelry.
“Although the silver market is projected to reach a physical surplus in 2021, it should be the lowest since the 2015 deficit,” the experts summarize.
Bulletin of the Gold Producer