Topics in this section: - Silver-market surplus to rise in 2019, BI model shows - Global jewelry demand may steady on weak silver prices - Macro dilemmas, gold's rise may spur silver investment - Silver's industrial-application demand keeps growing - Silver's 2019 prospects are bright on industrial demand, Chindia
This analysis is by Bloomberg Intelligence analyst Eily Ong and contributing analyst Tobias Nystedt.
The world's silver market is expected to remain in surplus in 2019, based on Metals Focus data and our estimates. Annual global silver demand in 2019 could rise to 972 million ounces vs. 2018's 956 million-ounce level, essentially given greater industrial applications for the metal. Yet we expect the market for the metal to remain oversupplied, with higher mined-production of as much as 3% year-over-year. The silver surplus will reach about 63 million ounces in 2019, when we estimate the metal's total world supply will increase by 3% to over 1 billion ounces. A silver price recovery would help to boost 2019 sales growth for producers including Fresnillo, Polymetal, Buenaventura, Goldcorp, Pan American Silver, BHP Billiton, Glencore, KGHM, Hecla and Coeur Mining.
Global jewelry demand may steady on weak silver prices
The sluggish metal price below $20 an ounce could spur bargain hunting for silver jewelry in 2019, especially in India, in our view. Global silver jewelry demand will increase 2% year-over-year to 250 million ounces in 2018, based on Metals Focus data. But we expect volume to be steady during 2019, with jewelry consumers likely to delay any silver discretionary-spending spree due to uncertain global economic growth and the potential absence of a strong price recovery for the metal until 2020. A Bloomberg-compiled consensus on Jan. 3 sees the silver price averaging $15.89 in 2019 and rising 9% to $17.33 in 2020 vs. $15.7 in 2018.
Macro dilemmas, gold's rise may spur silver investment
Investors' appetite for silver should improve in 2019 vs. 2018, yet remain below 2015's level, in our view. Silver investment demand could get a knock-on boost from gold, especially if weak global equity performances year-to-date continue through 2019, along with a sluggish dollar. But a potential silver-price recovery could stall, with investors likely to remain cautious ahead of an anticipated oversupplied market, with production again exceeding demand this year. That's despite the challenging global growth outlook (including China's economy, Brexit and trade war developments), which would normally spur metals buying.
Physical silver investment (including coins, medals and bars) likely declined 1% to 156 million ounces in 2018, and should recover by about 5% to 164 million ounces in 2019, based on Metals Focus data.
Silver's industrial-application demand keeps growing
Silver will continue to be heavily reliant on industrial applications in 2019, with demand climbing 2% year-over-year, we estimate, to make up 54% of global consumption at 972 million ounces. Jewelry and silverware follow at 26% and physical investments (17%). Silver use in photography has fallen to 3% of demand, based on Metals Focus data. The key risk to silver demand is reduced metal use per unit, in our view, particularly if rising prices trigger more-aggressive substitution of other metals -- particularly within the solar industry.
Companies Impacted: Changes in silver demand and the metal's price will affect the earnings of global silver producers. This includes leading miners Fresnillo, Goldcorp, Glencore, KGHM, Wheaton Precious Metals, Polymetal International, Pan American Silver, BHP Billiton and South32.
Silver's 2019 prospects are bright on industrial demand, Chindia
The industrial-applications sector, the biggest consumer of silver, should increase demand for the metal in 2019. While global-mined production is set to recover vs. the prior year, we expect it to remain below 2014-17 levels, with scrap volume dependent on market prices. India and China will also probably support silver, particularly in the form of jewelry demand, with physical investors likely to be encouraged by the gold-price recovery. Any further rise in the gold-to-silver dollar-price ratio may also start to favor interest in silver, in our view.
Companies Impacted: Fresnillo, Polymetal, Buenaventura, Pan American Silver, BHP Billiton, Glencore, KGHM, Hecla Mining, Coeur Mining, Tahoe Resources, SSR Mining, First Majestic, MAG Silver, McEwen Mining and Fortuna Silver Mines are among the leading global silver miners.
