China Gobbling Up Silver!

The CPM Group in a new report said silver use in China is estimated to have risen around three and a half times over the last decade, from 40.8 million ounces in 2000 to 139.2 million ounces in 2009, twice as large as many Western commentators have previously suggested. “Chinese silver fabrication demand is projected to account for nearly a fifth of global silver fabrication demand this year,” CPM Group said.

China has also recently encouraged it's populace to buy both silver and gold as investment vehicles against inflation.

The report further reviews uses for silver, including new fabrication demand such as solar panels, as well as investment. The report includes 10-year projections of supply, demand, and prices under a base case and two alternative scenarios.

“Strong investment demand, the single most important factor in influencing the price of the metal, is expected to keep silver prices at elevated levels during the projected period,” CPM Group said in a news release announcing the publication, which can be purchased. “Investors who view silver as a safe-haven asset are expected to continue buying large amounts of silver over the next couple of years as uncertainty regarding global economic growth, financial market instability, and volatility in major currency markets persist. As these concerns recede later in the decade, investment demand is projected to decline. Silver prices are expected to weaken alongside the decline in investment demand as the decade progresses.”

CPM Group said fabrication demand for silver is forecast to rise over the projected period, providing additional support to prices.

“Even in present economic conditions, there is strong demand for some of the products in which silver is used, including various electronic components used in a full range of consumer and industrial equipment,” CPM Group said. “Fabrication demand for silver is expected to rise further over the next few years, due to an anticipated improvement in global economic activity coupled with increased use of silver in some of its new and relatively new uses, such as solar panels, silver-zinc batteries.”

Primary silver mine production is expected to increase due to high silver prices and the relatively low cash and total operating costs, CPM Group said. Also, since much silver is produced as a byproduct of gold, copper, lead, and zinc, favorable market fundamentals and rising prices for these metals are expected to mean higher output and thus more silver as a by-product during the initial years covered by the CPM Group report. However, during the second half of the forecast period, net additions to silver mine supply are expected to decline, which CPM Group forecast to support silver prices during that time.

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Rick

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