India helps silver demand glitter at new high in 2022

Led by the doubling of jewellery demand and a 188 per cent rise in exchange-traded fund (ETF) investment in India, silver demand soared to a record high of 1.242 billion ounces (boz) in 2022. This lifted the market deficit to a new peak of 237.7 million ounces wiping off all the surpluses accumulated over the past decade, the World Silver Survey 2023 has said. 

“All major silver demand categories achieved record highs in 2022, pushing the total silver demand to a new high… Silver jewellery fabrication soared 29 per cent to a record level last year at 234.1 million ounces (moz),” the survey released by The Silver Institute in New York on Wednesday said. 

Pent-up demand

Overall, demand jumped 24 per cent in India, followed by East Asia and North America, which witnessed a 7 per cent and 6 per cent growth, respectively. Europe, however, registered a six per cent drop in demand.

“As with jewellery, gains in silverware were almost entirely due to India on the back of employment and incomes returning to pre-pandemic levels,” it said.

“India imported 9,500 tonnes of silver in 2022. Silver was looked at as a substitute to gold for jewellery and investment,” said Manav Modi, analyst, commodity and currencies, Motilal Oswal Financial Services Ltd (MOFSL).

New demand milestone 

Net physical silver investment rose for a fifth consecutive year to a new peak of 332.9 moz. “India emerged as the top performer last year with silver investment benefiting from lower prices and bargain hunting,” the survey said.

Industrial demand for the precious metal rose by 5 per cent, physical investment increased by 22 per cent, and jewellery and silverware rose by 29 per cent and 80 per cent, respectively. This resulted in the total global silver demand surging to a milestone. 

“Since 2020, the global demand  has increased by 38 per cent as world economies recover from the pandemic,” it said. But the second consecutive annual deficit was possibly the most significant deficit on record. 

“The combined shortfalls of the previous two years comfortably offset the cumulative surpluses of the last 11 years,” the survey done by Metals Focus, the London-based independent precious metals consultancy. 

Green economy gains

Global mine production, however, fell marginally to 822.4 moz. This was on the heels of a strong growth in 2021 when production rose by nearly 6 per cent as mines recovered from the disruption caused by the pandemic. 

With the exceptions of a drop in photographic and brazing alloys demand, all other silver fabrication sectors achieved new highs. “Demand from the industrial segment posted another record in 2022, of 556.5 moz. Some of these gains reflected in green economy applications, particularly the significant growth in photovoltaics (PV), which consumed 140.3 moz of silver in 2022,” the survey said.

The industrial demand was supported by electrification within the automotive segment and other power generation and distribution investments. 

Output drop

“A rise in vehicle output, 5G network investments, and growth in the construction industry also assisted this segment,” it said. Similarly, other industrial demand fabrication rose, chiefly due to increased demand for ethylene oxide catalysts. 

The overall demand was also helped by thrifting and substitution (outside of P.V.) remaining modest.  Exceeding jewellery in percentage terms, silverware demand in 2022 increased by 80 per cent to 73.5 moz, another record high.

 The production dropped in 2022 arising from a lower by-product output from lead and zinc mines, particularly in China and Peru.  

Recycling activity was up for a third year in a row, with a 3 per cent increasing taking the total to a 10-year high of 180.6 moz. This was driven by the 7 per cent rise in industrial scrap, which reflected an increase in the processing of spent ethylene oxide catalysts. However, jewellery and silverware recycling saw marginal gains.

 2023 outlook

This year will witness a solid demand for silver. Industrial fabrication should reach an all-time high, boosted by continued gains in the P.V. market and healthy offtake from other industrial segments. 

“The pace of silver growth may not be the same as last year, when the numbers were really surprising. But if the growth stabilises, as projected by the RBI, then we could see a similar pace,” said Motilal Oswal’s Modi.

Although bar and coin demand and jewellery fabrication are expected to fall short of last year’s exceptional levels, both are forecast to remain historically high, the silver survey said. 

Supply, by contrast, is expected to achieve only low single-digit gains. As a result, this year will also see another large deficit for silver, amounting to a projected 142.1 moz, which would be the second-largest deficit in more than 20 years.

Global silver inventories by the end of this year will have fallen by 430.9 moz from their end-2020 peak. This is equivalent to more than half of this year’s forecasted annual mine production, and more than half of the inventories presently held in London vaults, the Silver Institute’s survey said.