General Characteristics
- Silver's unique
properties make it a very useful 'Industrial Commodity', despite it
being classed as a precious metal.
- Demand for silver is
built on three main pillars; industrial uses, photography and
Jewellery & silverware accounting for 342, 205 and 259 million
ounces respectively in 2002.
- Just over half of
mined silver comes from Mexico, Peru and United States, respectively,
the first, second and fourth largest producing countries. The third
largest is Australia.
- Primary mines
produce about 27 percent of world silver, while around 73
percent comes as a by-product of gold, copper, lead, and zinc mining.
- The price of silver
is not only a function of its primary output but more a function of
the price of other metals also, as world mine production is more a
function of the prices of other metals.
- The tie between
silver and economic activity is strong, given that around two-thirds
of total silver fabrication is in the industrial and photographic
sectors.
- Often a faster
growth in demand against supply leads to drop in stocks with
government and investors.
- Economically viable
primary silver mine is a function of the world silver price level.
|
|
World Silver Supply from Above-ground Stocks
|
Million
Ounces
|
|
2001
|
2002
|
Implied Net Disinvestment
|
-9.5
|
20.9
|
Producer Hedging
|
18.9
|
-24.8
|
Net Government Sales
|
87.2
|
71.3
|
Sub-total Bullion
|
96.6
|
67.4
|
Scrap
|
182.7
|
184.9
|
Total
|
279.3
|
252.3
|
|
|
Indian Scenario
- Silver imports into
India for domestic consumption in 2002 was 3,400 tons down 25 % from
record 4,540 tons in 2001.
- Open General License
(OGL) imports are the only significant source of supply to the Indian
market.
- Non-duty paid silver
for the export sector rose sharply in 2002, up by close to 200%
year-on-year to 150 tons.
- Around 50% of
India's silver requirements last year were met through imports of
Chinese silver and other important sources of supply being UK, CIS,
Australia and Dubai.
- Indian industrial
demand in 2002 is estimated at 1375 tons down by 13 % from 1,579 tons
in 2001. In spite of this fall, India is still one of the largest
users of silver in the world, ranking alongside Industrial giants like
Japan and the United States.
- By contrast with
United States and Japan, Indian industrial offtake for fabrication in
hardcore industrial applications like electronics and brazing alloys
accounts for only 15 % and the rest being for foils for use in the
decorative covering of food, plating of Jewellery and silverware and
jari.
- In India silver
price volatility is also an important determinant of silver demand as
it is for gold.
|
|
India Industrial Fabrication , 2002
|
Percentage
|
Pharmacy & Chemicals
|
22.4
|
Foil
|
9
|
Plating
|
13.7
|
Solders & Brazing
|
5.4
|
Electrical
|
13.5
|
Photography
|
0.85
|
Jari
|
17.1
|
|
|
World Markets
- London Bullion
Market is the global hub of OTC (Over-The-Counter) trading in silver.
- Comex futures in New
York is where most fund activity is focused
|
|
Frequency Distribution of Silver London Fixing
Volatility from 1995 till date
|
Percentage Change
|
> 7%
|
5-7%
|
3-5%
|
< 3%
|
Daily
|
|
|
|
|
Number of times
|
7
|
10
|
85
|
2086
|
Percentage times
|
0.3
|
0.5
|
3.9
|
95.3
|
Weekly
|
|
|
|
|
Number of times
|
9
|
15
|
50
|
363
|
Percentage times
|
21
|
3.4
|
11.4
|
83.1
|
|
|
Biggest Price Movement since 1995
|
Between February 4 - 6, 1998, daily prices rocketed by
22.3%, as on a noted US financier had accumulated nearly 130 ounces of
physical silver.
Note: Post September 1999 daily silver prices have not
shown more than 5% movement once and weekly silver prices only once.
|