Silver Supply Shortage? What The Data Reveals

A lot of buzz has generated around a potential worldwide silver shortage, as the U.S. Mint indicated in a recent statement. However, early this month, a new statement was issued clarifying that the only real shortage was of “blanks” required for the Mint to manufacture the silver eagles in sufficient quantity. Nonetheless, the misunderstanding has resurfaced concerns around a depleting silver supply, but the truth lies in the fact that the silver market is not in a shortage yet, but is much tighter than the current price indicates. 

Moreover, as the crypto market cooled off recently, we have witnessed a move by some back into the precious metals. It’s interesting to emphasize again here, that most of the market for crypto lies in investors seeking alternative currencies that can help them hedge against inflation, provide them with stability, and enable them to preserve their wealth. In essence, the same market dynamics as that of precious metals. The difference is that while cryptocurrencies are unpredictably volatile, precious metals like gold and silver have proved their safe-haven status for millenia, and more people are purchasing precious metals,  cryptos, or both. 

We go into these topics and more in our monthly e-newsletter. If you’d like to access these insights, subscribe to the newsletter here. Now, let’s dive deep into some data that has been recently published about the state of the silver market. 

The 2021 World Silver Survey speaks for itself

The Silver Institute has published the World Silver Survey every year for the past three decades, covering supply and demand statistics for various sectors of the silver market and price and trade data. This year’s survey reveals a comprehensive view of the global silver market. 

Global supply in the past ten years — from 2011 until current day — has seen a relatively flat trajectory. There are many reasons for that; however, it’s important to state that I do not believe we are at peak silver, but we could be very close. 

According to the United States Geological Survey, silver will be the first element to go off the periodic table, an allusion to the threat of silver supply depletion, but there are a lot of variables around that. For instance, at $28/ounce silver, supply depletion may be possible, but at $158/ounce silver, mining opportunities that seemed economically impossible will be perceived as viable. Today, we are mining silver at a lower grade historically than we did 50 years ago. 

Moreover, the World Silver Survey’s data on longer-term industrial demand indicators covers the demand in photovoltaic applications from 2019 to its projected state in the future in 2025, whereby it is expected to flatten out. However, the amount of solar energy that is being used throughout the world continues to increase, and it’s important to consider this because the efficiency in solar panels has increased. We are now getting nearly as much electricity conversion per panel for about one quarter of the amount of silver that was in the original panels. 

In the longer-term industrial demand indicators, it is also demonstrated that light duty vehicle production also moves up in the next 5 years. There’s a lot to unpack here, but I will leave it for my upcoming guest on my Mastermind Series — the author of this study — to dive deep into silver’s industrial usage over the next decade, as he projects that 80% of the silver market in ten years will be used for industrial purposes. 

On the effects of the global COVID-19 pandemic for silver demand, the survey reveals that there has been a greater move into the investment side of silver, with the largest increase ever into exchange traded products (ETPs), about 350 million ounces by exchange traded funds. On top of that, an extremely robust retail market of about 200 million ounces. We’re looking at approximately 550 million ounces in 2020 that went into silver as an investment vehicle; a greater value than the amount used in industrial applications. A huge spike, and one that I believe will continue based on what the data continues to show. 

People are waking up — institutions are waking up, and while pension funds haven’t kept up pace, there is a lot of money sitting on the sidelines in the stock and bond markets that could potentially come into the silver market. And, what that would do to the mining shares is almost beyond description. 

These are just some of the findings of the 2021 World Silver Survey that I discussed in my recent presentation for the virtual Silver Investor Forum. If you missed the live event, you can watch the recording here. 

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