Major silver deficit expected

This year will see the second-largest silver deficit in more than two decades amid record demand, according to the Silver Institute.

Global supply is expected to achieve only low single-digit growth. "As a result, this year will also see another large deficit for silver, amounting to a projected 142.1Moz, which would be the second-largest deficit in more than 20 years," the institute said Wednesday in a release. 

"Adding up the supply shortfalls of 2021-2023, global silver inventories by the end of this year will have fallen by 430.9Moz from their end-2020 peak," it added.

That figure is equivalent to more than half of this year's forecast mine production and more than half of the inventories presently held in London vaults offering custodian services, the institute said.

"We are moving into a different paradigm for the market, one of the ongoing deficits," Philip Newman of consultants Metals Focus, which prepared the Silver Institute's data, told Reuters.

However, he added that this would not necessarily cause prices to shoot higher because while visible silver inventories are falling, vast amounts of metal held by individuals and investors can still fill supply gaps.

Global demand for silver rose 18% last year to a record high of 1.24bn ounces in 2022, the Silver Institute said.

In 2022, silver industrial demand rose by 5%, physical investment increased by 22%, and jewelry and silverware rose by 29% and 80%, respectively, the institute said. Since 2020, global demand has increased 38% as world economies recover from the pandemic, it added.

"Record global silver demand and a lack of supply upside contributed to last year's 237.7Moz market deficit, the second consecutive annual deficit, possibly the most significant deficit on record," the Silver Institute said. It added that the combined shortfalls of the previous two years comfortably offset the cumulative surpluses of the last 11 years.

The Silver Institute ranks Mexico as the world's leading producer in 2022, with 199.2Moz, up 3.1Moz up from 2021.

According to national statistics bureau Inegi, Mexico's silver output rose 0.2% to 4,183t (133Moz) in 2022, with Zacatecas state leading production.