DiRienzo: Silver demand will rise

The Silver is considered as one of the best investment of this decade. What is the opinion of the CEO of the Silver Institute Michael DiRienzo?

Upner:  What were basic trends in the silver demand and supply in the last year?

Michael DiRienzo:  Total silver fabrication demand stood at 876.6 Moz in 2011, down 1.5 percent but still reaching its second highest level since 2000.  Last year, silver’s use in industrial applications fell by 2.5 percent to 486.5 Moz.  That said, industrial fabrication in the first three quarters of 2011 was particularly strong; however, the Eurozone crisis during the fourth quarter had a notable impact on industrial demand, resulting in the slight decline in the full year total.  Even so, China posted a 5 percent gain in industrial fabrication led by robust household purchases, and strong automobile demand.  Jewelry demand slipped to 159.8 Moz, the product of volatile prices and a weak global economic backdrop.  Photography fell by 8 percent, posting the slowest percentage decline in six years, with the medical field deferring migration to digital systems due to a lack of funding.  Finally, silverware demand fell to 46.0 Moz, due to the sluggish global economy and ongoing structural losses.

Silver mine production rose for the ninth successive year in 2011, to a fresh record of 761.6 Moz (23,689 t). Production from primary silver mines fell modestly due to lower processed grades and one-off disruptions at several large operations, including the world’s two largest primary mines, Cannington and Fresnillo. These losses prevailed over production gains originating from a handful of new mines ramping up. However, growth was seen for silver produced as a by-product of gold and lead/zinc mining.

Silver mine production rose by a modest 1.4 percent to 761.6 Moz in 2011, largely due to gains from by-product gold and lead/zinc mining.  Mexico was the world’s largest silver producing country in 2011, followed by Peru, China, Australia and Chile.  Global primary silver mine supply dipped slightly last year due mainly to a fall in processed grades, to account for 29 percent of total silver mine production in 2011.

Upner:  Do you see any changes in the demand / supply trends in the 2012 comparing to the last decade?

Michael DiRienzo:  We see no great changes in the supply side but feel that demand, especially Industrial demand to grow stronger and by 2015 to reach some 666 Million Ounces.  Stronger silver industrial demand in the U.S. and Asia will be a key factor in driving growth in the global total through 2015, and healthy developing country demand especially in markets such as China and India, will also be an important factor.  Much of the forecast growth will come from established applications, such as silver’s use in electrical contacts and in the photo-voltaic market. The technical proficiency of silver limits the ability to switch in favor of lower-cost alternatives, making the metal largely price inelastic. Emerging end-uses that benefit from silver’s antibacterial properties or incorporate silver’s electrical and thermal conductivity are expected to boost silver consumption through 2015.

Upner:  Some investors emphasize that there was an overconsumption of the silver for last 10 – 15 years. Do you think that it is true? Are we going to face of the shortage of the Silver in the near future? If yes or no so why?  

Michael DiRienzo:  We could face shortages to a degree.  For example, it was only a year ago that the US Mint was having difficulties sourcing silver for its American Eagle Coinage program and had to halt production.  So certain sectors can see shortages.

Upner:  We were witnessing that e.g. Endeavor silver company did not place its production to the market and it has the strategy to wait for better prices and then they will sell their metal. Do you know any other companies with similar strategy? Is this behavior usual on the silver market?

Michael DiRienzo:  I am not going to respond to individual company strategies.

Matúš Pošvanc thanks for interview.


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