Silver Supply/Demand Dec 2022

Economics 101 tells us that the price of most anything is determined by supply and demand. That excludes Eskom of course because they charge whatever the hell they want without meeting the demand at all. For physical silver, which is our main focus at Precious Metal Bars, it might be prudent to have a closer look at this equation. The investment required to buy physical silver bars and coins at the moment seems high relative to what they cost over the last year. On 15/07/22 a 1 kg silver bar cost R13,431. Today the same bar costs R17,148.

It is a well known fact that prices moves in cycles just like the tides. You need to buy at low tide and sell at high tide. Right now we are at the end of a low tide which is going to go up to a high tide in a year or two. So, looking at price right now is really irrelevant. The important fact is where the price will be when the silver goes to high tide. Obviously it will be much higher than what it is today.

The Silver Institute just published its supply/demand figures for 2022. Let us analyze the important aspects from a investment point of view. See The Silver Institute table below.

The first significant fact is that we can see the mining production peaked in 2016 at 900 million ounces. The 2022 total mining supply was only 843.2 million ounces. It has been declining since 2016. This will push prices up.

The demand in 2016 was 979.4 million ounces and 1,101.8 million ounces at the end of 2022. The shortfall then between supply and demand at the end of 2022 is 258.6 million ounces. We all know what happens to prices when there is a supply problem. Just ask your wife how outrages the price of chicken is right now. There is a huge supply shortage after the bird flu wiped out more than a million chickens.

Photovoltaic silver demand ( sun panels ) went up from 55 million ounces in 2012 to a whopping 127 million ounces in December 2022. 5 G technology will push this even higher as every device using 5 g uses silver.

Silver bars and coins went up from 240.7 million ounces in 2012 to 279.2 million ounces in December 2022. This is a huge jump which will only accelerate as demand increase.

Lastly buy most importantly, we need to consider the net investment in ETP ( Exchange Traded Products ). The net ETP in 2012 was 53.6 million ounces. This figure has declined to 25 million ounces in Dec 2022. The ETP industry has sold more than 50% of their physical silver as the silver price was relatively flat. The vital information here is the figures for 2019 of 83.3, 2020 of 331.1 and 2021 of 64.9 million ounces. These figures tells us very clearly how much physical silver these ETP funds are going to buy once the silver price starts to run.