Record photovoltaic installations will lift silver demand this year.
The outlook for silver demand in 2022 is “exceptionally promising”, with global demand tipped to soar 8% to a record of 1.11-billion ounces, the Silver Institute reported this week.
The increase will be driven by record silver industrial fabrication, which is forecast to improve by 5%, as the metal’s use expands in both traditional and critical green technologies. Even with ongoing efforts to reduce silver loadings, the institute forecasts that record photovoltaic installations will lift silver demand in this segment to an all-time high in 2022.
The outlook for silver demand in automotive and 5G-related applications also remains robust, notwithstanding the prolonged worldwide chip shortage.
Physical silver investment demand, consisting of silver bar and bullion coin purchases, is projected to jump 13% in 2022, achieving a seven-year high.
Silver's use in jewellery and silverware is also expected to strengthen in 2022 by 11% and 21%, respectively, the institute reports.
Meanwhile, after shifting to a market deficit in 2021 for the first time in six years, the silver market is expected to record a supply shortfall of 20-million ounces this year. The Silver Institute, however, notes that the projected deficit is relatively modest in absolute terms.
Total global silver supply is projected to rise by 7% to 1.092-billion ounces in 2022. The main contributor is silver mine production, which is forecast to grow 7% to a six-year high this year. This will be driven by higher output from primary silver mines, particularly from several big existing operations and supported by new projects coming online.
The increase in silver recycling should be more modest in 2022, with volumes likely to advance by 3%, with the rise entirely owing to higher industrial recycling. All other areas are expected to record lower volumes, as reduced distress selling weighs on jewellery and silverware scrap.
The Silver Institute is forecasting 2022’s average silver price to be $24.80, which is 1% below the average price of 2021. Even so, it will still represent a historically high yearly average, the organisation notes.
“Early 2022 has seen gross domestic product growth downgraded for several major economies, along with rising financial market volatility. This points to an increasing risk that the speed of the US interest rate hiking cycle could turn out to be slower than current market expectations have allowed. As a result, silver prices should initially benefit from fresh investor interest in precious metals. Silver's high beta should also see it outperform gold, with the gold:silver ratio projected to retreat below 70 by year's end,” it says.