Despite the uncertainty surrounding the global silver market, Mexican mining companies remain positive and bet on the precious metal, as they are convinced that silver prices will stabilize in the long term.
Producers expect that despite the recent downward trend in silver costs, demand could stabilize in the long term as the sectors that require the metal will grow significantly.
For about two years, From May 2020 until June 2022, silver prices stood at a figure between US$22 and US$28/oz, but prices plummeted to a recent low of US$17.77/oz in September 2022. Nonetheless, the metal already experienced a modest recovery, with its prices rising above US$18/oz this past week. Nonetheless, experts stressed that prices could go down again in the short term. “Some factors have emerged over the past months that suggest that gold and silver prices could go down, at least in the short term,” said Jeffrey Christian, Managing Partner, CPM Group.
These factors include rising inflation, forcing the US and other important economies to raise their interest rates, a generally weak economic outlook and the war in Ukraine. Under these circumstances, Capital Economics foresaw that silver prices might end 2022 at US$18/oz, while BMO Capital Markets estimated that silver average prices may stand at US$19.90/oz in 2023.
Despite the uncertain environment, mining companies in Mexico remain bullish, arguing that the energy transition will be a booster for the demand of different minerals, including silver. Some companies are even worried that they will not be able to meet the demand this transition will create.
According to Dan Dickson, CEO, Endeavour Silver, prices would probably remain subdued during the next six months, but he expects that after three or five years, prices will be much higher. This increase, he said, will be driven by the increase in the demand for electrical devices such as cars and solar panels. “This will have a positive impact on the side of the demand, but we do not have enough supply to offer,” Dickson added.
Keith Neumeyer, Founder, President and CEO, First Majestic Silver, agreed with Dickson. He highlighted the silver consumption of electric car manufacturers, which stood around 70Moz in 2021 and is expected to grow up to 100Moz in the next decade. “With governments around the world promoting the use of electric cars, some cities forbidding internal combustion engine-based cars, the automotive industry will have to produce many electric units. This will lead to more silver consumption… I think silver prices will go up,” said Neumeyer.