Silver Demand Expected to Exceed 1 Billion Ounces in 2021

Every key area of silver demand is forecast to rise in 2021, according to the Silver Institute’s Interim Silver Market Review.

The institute projects silver demand will come in at 1.029 billion ounces this year. That would mark the first year demand has exceeded 1 billion ounces since 2015.

Industrial demand for silver is expected to reach a record high of 524 million ounces. Demand in the solar sector will be a primary driver, with a 13% increase to over 110 million ounces. Meanwhile, brazing alloy and solder demand is set to improve by 10% in 2021, helped by a recovery in housing and construction.

Investment demand is also expected to chart a significant 32% increase, rising to a 6-year high of 263 million ounces. Investment demand in the US and India is leading the way.

Building on solid gains last year, US coin and bar demand is expected to surpass 100 million ounces for the first time since 2015. A burst in US investment demand started with the social media buying frenzy earlier this year and then spread to more traditional investors.

Indian demand reflects improved sentiment towards the silver price and a recovering economy. Overall, physical investment in India is forecast to surge almost three-fold this year, after collapsing in 2020.

ETF holdings are projected to rise by 150 million ounces in 2021. Over the last three years, silver ETF holdings have surged 564 million ounces. As of Nov. 10, ETFs held 1.15 billion ounces of silver, nearing the record of 1.21 billion ounces set earlier this year.

To date, the price of silver is up 28% year-on-year. Silver prices rose 27% in 2020.

The upside reflects healthy investor inflows into silver, on the back of supportive macroeconomic conditions, notably the persistence of exceptionally low interest rates, concerns about uncontrolled fiscal expansion and, most recently, growing concerns about rising inflationary pressures. The gold:silver ratio fell to 62 in early February, its lowest since July 2014. However, since then it has risen, to stand at around 74 in early November. Even so, this still compares favorably with last year when the ratio averaged 89. In terms of the full-year price average, Metals Focus expects silver to rise by 24% year-on-year to $25.40. This would achieve the highest annual average since 2012’s $31.15.”

Silver jewelry and silverware fabrication are expected to partially recover from 2020’s depressed totals, rising by 18% and 25% respectively, to 173 million ounces and 40 million ounces.

On the supply side, mine output is projected to increase by about 6%. This is primarily a function of mines reopening after 2020 shutdowns due to COVID-19. Countries where output was most heavily impacted last year, including Peru, Mexico and Bolivia, have charted the largest production increases.

Even with mine output recovering, the silver market is expected to record a physical deficit of about 7 million ounces this year. This will mark the first deficit since 2015.

You can find charts and graphs and other data on the silver market HERE.