'Global Silver production to hit historic 1 billion oz mark in 2012'

LONDON (Scrap Monster): Global silver production should rise to over one billion ounces in 2012 for the first time in history as mine production continues to grow in response to strong margins for producers, said CPM Group, a New York based commodities consulting group.

The investment demand for silver will remain historically high, but down slightly from last year’s level as investors become more price-sensitive in their silver purchases. Fabrication demand for silver is seen rising over last year, driven by use in electronic devices, CPM Group added.

Global silver supply in 2012 to reach 1.01 billion ounces, which will be the first time total annual silver supply reaches over a billion. The projected increase is forecast to come nearly exclusively from higher mine production, which is seen at 729.0 million ounces, with secondary supply seen at 279.8 million.

Global refined market economy silver supply rose to 995.1 million ounces in 2011, up 22.6 million ounces or 2.3% from 2010. Of that, mine supply was 713.6 million ounces, up 4%, the first time mine output surpassed 700 million ounces, they added.

Investor demand for silver should remain historically high, but investors are becoming more price-sensitive when making purchases. For 2012, investors are expected to buy 131.7 million ounces of silver, down slightly from the estimated 133.2 million bought in 2011. The estimate of 131.7 million would be the fifth highest level of annual net additions to annual investment demand and follows six consecutive years of net additions to investor holdings.

--Silver fabrication demand in 2012 is expected to rise to 879.1 million ounces, a 2% rise over 2011’s 861.9 million. The main growth-driver is expected to be use in electronics, which should offset losses expected from the solar panel industry and photography.

--Jewelry demand, the largest source of fabrication demand, is seen rising to 296.1 million ounces, up from 2011’s 290.9 million ounces. Higher and still rising gold prices were positive for silver jewelry demand during this period. Silver jewelry, although it is not an absolute substitute for gold jewelry, especially in developing countries, to some extent served as a partial substitute last year.

--The electronic sector silver usage rose 4.3% in 2011 to 221.8 million ounces and is expected to increase by 12.5 million ounces in 2012. Aggressive price developments in light-emitting diode technologies, which use silver, have been boosting demand for silver in recent years and are expected to continue to boost demand in the future.

--Demand for silver in solar panel use rose to 59.8 million ounces in 2011, up 11.2 million ounces from the year prior. The bulk of the demand came from China – around 29 million ounces – to use in the panels. Demand for silver in panels is seen falling to 57.5 million in 2012 as demand for new solar panels in Europe falls and from supply overhang from excess output in China.

--The photography sector continues to see declines in silver usage, which fell to 102.6 million ounces in 2011, from 110.9 million in 2010. Another 5.8 million ounces are expected to be lost in 2012. Because this has been ongoing for 12 years, the negative impact of the drop is being felt less by the silver market, CPM Group concluded.