Higher silver prices fail to put a dent in demand
Liezel Hill

Industrial demand for silver rose for the sixth year in a row, and jewellery fabrication slipped by only 2% last year, as high and volatile prices for the metal failed to deter buyers, according to an industry report published on Wednesday.

In their World Silver Survey 2008, launched in New York, GFMS and the Silver Institutue report that the average silver price last year, at $13,38/oz, was 16% higher than in 2006.

Further, investment demand, which has played a key role in driving prices upwards, had continued to grow since, and had sent silver prices to fresh highs above $20/oz, earlier this year.

However, despite the higher prices, industrial demand for silver increased by 7%, to 455,3-million ounces.

A key factor behind the increase last year was the more than 6% rise in the electrical and electronics sector, which broke the 200-million-ounce mark for the first time, the report said.

India, China and the US accounted for 70% of the world rise in all industrial uses, while Germany, Italy and France also posted gains.

Total industrial demand reached 54% of total global silver fabrication demand in 2007.

Jewellery fabrication "coped well" with higher prices, declining only 2% in 2007, mainly because of reduced demand in Europe and the Indian subcontinent, which offset growth in East Asia, where Chinese jewelry fabrication rose 13% over the year.

Silverware demand fell by 4% in 2007, to 58,8-million ounces, and photographic demand continued to slide, as more and more consumers switched to digital photography.

Total global silver fabrication grew 1% in 2007, to 843,7-million ounces, according to the World Silver Survey.

SUPPLY

Global silver mine production rose by 4% last year, to 670,6-million ounces.

Interestingly, the percentage of the metal produced from primary silver mines increased significantly during the year, to account for 30% of all silver mined, from 19% a year earlier.

Peru was the world's biggest silver mining country in 2007, followed by Mexico, China, Chile and Australia.

Cash costs at primary silver mines rose to a weighted average of $1,52/oz, the report said.

This year, mine production is forecast to increase by about 40-million ounces, or 6%, GFMS chairperson Paul Klapwijk said in a copy of a presentation he made in New York on Wednesday.

7th May 2008

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