Global silver production set to fall in 2023 due to lower Mexican, Peruvian output

Global mined silver production is expected to fall 2% year-on-year to 820Moz in 2023, driven by lower output from operations in Mexico and Peru, according to The Silver Institute.

“Production from Mexico is expected to fall by 16Moz due to the impact of the suspension of operations at Peñasquito (owned by US firm Newmont) in Q2 and Q3 in response to the labor strike,” the institute underscored. 

“Even so, overall production from primary silver mines will still rise this year, driven by the expected ramp-up at the Juanicipio mine,” it added. 

These findings were reported by Philip Newman, managing director at Metals Focus, an independent precious metals research consultancy, and Sarah Tomlinson, director of mine supply, during The Silver Institute’s annual silver industry dinner in New York, the institute said in a statement.

Peñasquito’s operations were halted for more than four months after a strike began on June 7. According to mining chamber Camimex, Denver-based Newmont’s Peñasquito produced 566,000oz of gold and 29.7Moz of silver last year, making the Zacatecas state mine Mexico’s largest precious metals producer.

The Juanicipio project (56% MAG Silver Corp/44% Fresnillo) started commercial production on June 1, 2023, following a successful commissioning period. As Juanicipio ramped up its operations and transitioned to full capacity, there was a progressive reduction of its reliance on the nearby Fresnillo and Saucito plants (100% owned by Fresnillo) in Zacatecas state.

Despite weaker demand and a slight drop in total supply, The Silver Institute forecasts another sizable physical deficit in the global silver market in 2023, “marking the third consecutive year of an annual deficit.” 

“At 140Moz, this will be 45% lower than 2022’s all-time high, but this is still elevated by historical standards,” it said.

The Silver Institute also highlighted that Metals Focus believes the deficit will persist in the silver market for the foreseeable future. 

“Metals Focus expects the average silver price to increase by 6% year-on-year to US$23.10 [per ounce] this year.”

Through November 7, prices grew 8% year-on-year. And in the future, Metals Focus is firmly in the ‘higher for longer’ camp, as far as US interest rate expectations are concerned, the statement added. 

“This backdrop is not favorable for zero-yielding assets such as silver. The white metal’s investment appeal will also be hurt by poor confidence in industrial commodities due to a slowing Chinese economy. With this in mind, Metals Focus maintains a cautious outlook for the silver price for now and for much of 2024,” The Silver Institute said. 

DEMAND

Globally, total silver demand is forecast to ease by 10% to reach 1.14Boz in 2023. 

“Gains in industrial applications will be offset by losses in all other key segments. Despite the fall, total demand remains historically elevated, making the 2023 figure the second highest in Metals Focus’ data series,” The Silver Institute's statement adds.

However, industrial silver demand is expected to grow 8% to a record 632Moz this year. “Key drivers behind this performance include investment in photovoltaics, power grid and 5G networks, growth in consumer electronics and rising vehicle output.”