Who Are the Major Producers and Consumers of Silver?

Silver, the “white metal,” is highly sought after by investors and industrialists alike. Producers of electronics and medical supplies appreciate silver for its atomic properties. Collectors and jewelers cherish silver’s unmatched shine and malleability. Numismatists and investors each collect silver coins and bars.

As with all precious metals, silver supply is fixed and comes to market slowly. Mining companies need to extract silver from the ground—real silver can’t be printed up by central banks. This means silver investors need to keep their eyes on the supply and demand factors in order to make informed decisions.

In 2016, silver production declined, the first year-over-year decline since 2001. In 2015, however, silver production rose dramatically in the first decade-and-a-half of the 21st century. The problem for silver consumers is that demand keeps increasing faster than production. This is welcome news to the world’s silver producers.

Commodity Analysis: Silver

Silver, listed under the atomic symbol Ag, is not an active metal. A metal stable in water,  silver is only moderately toxic. Silver’s biggest industrial demands come from electrical wires and other electronics. You might find silver in alarm clocks, speaker wires, circuit boards, solar panels, and pressurized nuclear reactors. You can read more about silver’s attributes at The Silver Institute and Silver: Usage and Industrial Importance.

Notable properties of silver include:

  • Resistance to oxidation and corrosion
  • Better heat and electricity conduction than all other metals. (Silver is ideal for electrical products.)
  • Non-toxicity and ability to kill microbes and bacteria
  • Photosensitivity
  • Abundance, inexpensive price, and accessibility

How Much Silver Is There?

Most estimates suggest that the total world supply of silver is somewhere around 1.5 million metric tons (tonnes). Here’s a nice visualization. This is far more than the amount of gold in the world, which helps explain why pure silver is so much cheaper than pure gold.

Silver Producers

Most estimates put world production of silver at 20,000 tonnes per year. The majority of silver production is a by-product of base-metal mining. As much as 60% of new silver comes from mines extracting lead, zinc, and copper. Another 10-15% gets dug up during attempts at gold extraction.

Mexico leads the world in silver production, and by a healthy margin. Here’s a brief listing of the top 15 silver-producing countries, according to 2016 Thomson Reuters data:

  1. Mexico
  2. Peru
  3. China
  4. Russia
  5. Australia
  6. Chile
  7. Bolivia
  8. Poland
  9. United States
  10. Argentina
  11. Guatemala
  12. Kazakhstan
  13. Sweden
  14. Canada
  15. India

The story changes when you look at current silver reserves. Mexico may be the world leader in digging silver out of the ground, but it doesn’t hoard as much as some of its South American cousins (although the Mexican government officially holds more silver reserves than does the United States government).

In 2016, demand for silver hit a record high. Much of the new demand comes from India and Thailand, although North America did see a 5% year-over-year increase. There were also notable leaps in Chinese solar panel production, which can be silver-intensive, as well as industrial demands in Japan. There has also been a sharp rise in demand for silver bullion as an investment asset since the Great Recession of 2007 to 2008.

Silver Consumers

Top silver-consuming countries, in order:

  1. India
  2. United States
  3. United Kingdom
  4. Canada
  5. Germany
  6. Japan
  7. China
  8. Taiwan
  9. Thailand
  10. Hong Kong

 

Thanks to the meteoric rise of the middle class in China and India, among others, silver usage experienced a resurgence by the mid-2000s. Other top-importers tend to be wealthy countries. This is true of most investable assets.

As with production, silver consumption fell moderately between 2015 and 2016, although much of that decline was attributable to less clamoring for silver coins and bars, which may create a window of opportunity for present investors if supply continues to fall.

In fact, total investment metal demand for silver dropped 30% year-over-year in 2016. The one notable exception was the United States, which saw a nearly 10% increase in silver bullion demand.

Silver Demand by Investors

American investors pour more money into physical silver than anyone else in the world. In fact, American investors hold claims to approximately 100 million ounces of silver, more than the rest of the world combined (excluding India). This was not always the case. In the not-so-distant past, India used to be the number one silver bullion destination (although India still leads the world in non-bullion silver demand).

In November 2016, a Thomson Reuters GFMS-sponsored study showed that, since 2007, the world experienced a silver supply deficit in seven out of ten years. This deficit grew despite unpresented production by silver miners.

Silver Bullion as an Investment Asset

Gold remains the most popular precious metal for commodity investing, both in the United States and internationally. Silver is the second most popular investment metal, and is particularly popular for Self-Directed IRA inclusion.

The good news is that you can own real, physical silver bullion and store it in a tax-advantaged retirement vehicle. American Bullion can discuss your options and help you every step of the way. Our #1 goal is to help you take control of your own finances—and we promise to be transparent, safe, and efficient in the process.

Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.