GFMS: Global Silver-Market Surplus Increasing In 2018
(Kitco News) - The surplus in the global silver market will rise to 35.3million ounces in 2018, an increase from 2.4 million in 2017, the GFMS team atRefinitiv reported late Thursday.
Johann Wiebe, lead analyst for the GFMS team, reported onthe GFMS/Silver Institute Interim Silver Market Review during the annual silverindustry dinner hosted by the Silver Institute. The report includes provisionalsupply and demand forecasts for 2018.
The GFMS team forecasts silver will average $15.73 anounce this year. As of Nov. 10, the average was $15.89, which was 7% lower than$17.05 for last year.
Following a drop of 1.5% in 2017, total silver supply isforecast to rise by 0.3% to 998.4 million ounces, GFMS said. The increase isdue to growth in mine supply, which is forecast to grow to 865.5 million ouncesfrom 852.1 million a year ago, thereby reversing a two-year decline. Scrapsupply is expected to ease by 1%, according to the GFMS report.
Global physical demand is expected to contract by 3% to963 million ounces in 2018, compared to 992.8 million a year ago, according tothe report. This would be the third consecutive decline. Bar and coin demandwill be the primary driver, contracting 12.2% to 124.8 million ounces.
New physical coin demand has been weak this year,particularly in the U.S. during the first half of the year, as investors reliedon the secondary market with older-dated coins, GFMS said. Wiebe reported thatphysical bar and coin demand in other regions has also been “disappointing,”contracting as investors remained on the sidelines awaiting higher pricevolatility.
Demand for jewelry and silverware is forecast to fall0.6% to 252.9 million ounces due to softer demand in India and China.
“In the case of the former, the disappointing monsoonseason did not result in the expected increase in jewelry purchases, whereasfor the latter a generally weakening economic climate is hampering furtherpurchases,” GFMS said. “The decline in Thai jewelry fabrication has slowed thisyear with continued strong demand from the United States.”
The use of silver in a wide range of industrialapplications is accounting for some 60% of total silver demand in 2018, GFMSsaid. Analysts foresee a modest decline this year of 1.8% to 585.4 millionounces.
“Demand for silver used in the photovoltaic sectorcontracted on the back of an increasingly more challenging global environment,”GFMS said. “This has been particularly driven by government interventions atthe two largest economies of the world. Despite imposed import restrictions by[U.S.] President Trump, it is particularly changes in China that are settingthe tone for slower growth. The Chinese government introduced legislation toreduce solar subsidies in order to slow growth after new installationssignificantly exceeded its 13th five-year plan budget.”
The pace of the decline of silver used by the photographysector has slowed; still, this contracted by another 3.4% to 39.5 million ounces.Demand for electronic and electrical applications, however, continued to drivewhat GFMS termed “robust growth,” expanding by 2.8% to 249.6 million ounces.
Net holdings of silver by exchange-traded products havecontracted by around 500 million ounces to date, following several annualincreases in the last decade, Wiebe reported. Meanwhile, exchange inventorieshave increased for the third consecutive year, particularly on Comex, whichrepresents approximately 76% of total, rising by 52.5 million ounces, GFMSsaid. Thus, the net balance is expected to post a shortfall of 16.7 millionounces.
By Allen SykoraFor Kitco News
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