Silver demand set a record in every category in 2022 and is expected to continue growing. Meanwhile, silver production flatlined. Record global silver demand and a lack of supply upside contributed to a 237.7 million ounce market deficit in 2022.
The trends indicate that this deficit will expand in the next several years as demand continues to surge as supply begins to shrink, and there are some concerning trends indicating supply may contract rapidly in the coming years.
We’ve reported on the increasing demand, especially in the solar energy industry. An Australian study concluded that solar panel production could require most of the silver reserves by 2050. But there are also looming pressures on the supply side.
Mine output in several key countries is falling. According to a paper published in China and translated at ZeroHedge, in 2020, China had 41,000 tons of proven silver reserves in the ground. At the current mining rate, that left only about 11 years of remaining silver as of 2020.
By 2032, China’s underground silver deposits will be fully depleted, leading to resource extinction.”
China ranks among the top five silver consumers globally. The country charted an average annual silver demand of 6,300 tons over the last 10 years. Chinese mines produce about 3,350 tons each year, meaning the country already imports about half of its silver. If Chinese mine production falls as predicted, Chinese demand will put further strain on the global silver supply.
From 2033 onwards, China’s static silver demand of 6,300 tons will rely entirely on imports, exacerbating the global imbalance between silver supply and demand.”
There are similar concerns about Mexican silver mine output.
Mexico is currently the world’s leading silver producer. As of 2020, its silver resource reserves were estimated to be 37,000 tons. At the current mining pace, its reserves will be exhausted by 2026.
The table below displays the projected timeline of silver resource extinction given known reserves in the top 10 silver-producing countries. This is based on USGS data calculated in 2020.
United States: 25 years
Chile: 19 years
China: 11 years
Mexico: 6 years
Poland: 53 years
Peru: 26 years
Bolivia: 19 years
Australia: 67 years
Russia: 24 years
Other countries: 15 years
As a result of the silver resource extinction in China, Mexico, and other major silver producers, global annual silver supply will plummet by 15,450 tons. In other words, by 2036, global silver production will dip below 10,000 tons, while demand will continue to exceed 30,000 tons.”
Of course, this timeline could stretch out with the discovery of new silver deposits and technological advances that allow miners to reach metal in more difficult places. But the overall trajectory signals falling mine production in the years ahead.
Given the supply and demand dynamics, it appears that silver is significantly underpriced.
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