Silver is in Limited Availability, Not Keeping Up with Demand

Silver has been in high demand during the first half of 2015. Will the spike in demand create supply deficits? Here’s the full scoop…

Silver demand 7_30 is reporting an increased demand for silver across several industries during the first half of 2015, as well as heightened investor interest.

Thanks to customer desire for silver jewelry, silver demand continues to be on the rise. The U.S. imported an additional 11 percent of the metal around the end of

May. Additional imports are proving beneficial for Asian trade – U.S. silver imports from Thailand increased by 18.5 percent during the month; China followed with a 14 percent increase of their own. These statistics support the Thomson Reuters GFMS metal analysis firm, estimating that global silver demand will grow by 5 percent in 2015.

Ethylene oxide, a ubiquitous chemical made from silver, is also more sought-after than ever. Due to its many industrial applications (manufacturing of plastic, solvents, detergents and more), silver demand by mainly Chinese ethylene oxide producers should increase to 8.6 million ounces – a 61 percent increase in demand compared to 2014.

Unsurprisingly, the renewable energy industry remains the biggest driver of demand. In 2015, solar panel producers will require 65 million ounces of silver, amounting to

an increase of 8 percent over the previous year. The U.S. is the primary consumer in this industry, increasing in first half of 2015 demand by 76 percent compared to the same period in 2014. However, with their aggressive plans for green energy, China and India aren’t far behind.

Despite challenges in the precious metals market, investors remain optimistic on silver’s long-term status, leading to a 4.7 million ounce increase in global exchange traded fund (ETF) holdings. These investors are undoubtedly taking into account that, according to the gold/silver ratio, silver remains underpriced relative to the yellow metal.

Things aren’t looking so rosy on the side of supply – 2015 marks the third consecutive year during which mine supply has struggled to keep up with demand, placing the silver market in a deficit of 57.7 million ounces this year alone. Growth of supply contracts and more physical demand are expected to further strain the market and tighten available supply. In fact, the U.S. Mint had no choice but to temporarily suspend their sales of silver coins on July 7, as they were unable to keep up with an 80 percent increase in investor demand for bullion compared to June of 2014.

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Photo Credit: Andy Magee via Compfight cc