Silver Demand to Fall, Supply Remains Strong: COCHILCO

World silver demand is expected to decline in 2023 due to falling investment. However, supply and production are expected to continue to increase, the latter due to new silver mines in Mexico.

The Chilean Copper Commission (COCHILCO) reported that demand in 2023 will fall by 9.4% as Indian investors will not be as active as in the previous year. In addition, COCHILCO’s Executive Vice President, Joaquín Morales, said that the main consumer of silver will be the industrial sector, followed by physical investment. He added that while demand is expected to decline, supply is expected to reach 31,815t in 2023, which is 1.8% more than in 2022. 

At the end of July, the silver price was US$24.40/oz, representing an increase of 1.7% compared to December 2022. Furthermore, COCHILCO forecasts that the average silver price for this year will be US$24.60/oz. According to the commission's report, inflation and a weaker dollar boosted the price of silver during 2Q23 and, as the dollar is expected to weaken further this year, silver is expected to continue to benefit.

In 2022, Mexico, China, Peru, Poland and Russia were the top producers of silver, while the top silver-producing firms were Fresnillo, KGHM, Newmont, Glencore and Hindustan Zinc, reported Mining.com.

As the Silver Institute had predicted, Morales assures that there will be an increase in production in 2023. Previously, the institute announced that the expected production for 2023 is 1.055 million oz, which will be largely driven by mining companies in Mexico. "Production from silver mines is expected to increase 5% in 2023, the highest level since 2016. This growth will come largely from new silver mines in Mexico increasing production, along with higher by-product production from Chile due to new gold operations with high silver content.”

Previously, the Silver Institute detected some challenges the industry will face in 2023, such as Exchange-Traded Products (ETPs), forecasted to experience the largest annual decline in holdings of 110Moz owing to silver volatility. The institute highlighted that institutional investors could keep a bearish stance as real yields are likely to strengthen.

Michael DiRienzo, Executive Director, The Silver Institute, told MBN that while the industry should wait to see what 2023 brings, one thing remains certain: silver will have a promising year. “At the recent London Bullion Market Association conference, delegates were asked to forecast the precious metals prices one year into the future. Silver had the best forecast at US$28.30/oz, a 54% increase over the price at the time of the conference held this October. That is quite optimistic but reflective of silver's dual role as a precious and industrial metal.”