Last year, total mine production of silver was 819 million ounces, but demand for silver was 1.1 billion ounces.
Therefore, there was a 262 million ounce shortfall in silver. Thus far, the shortage has been mostly met by using recycled silver and from government stockpiles. Even so, the shortage is there.
Looking At The Numbers
Recently published data points argued that recycled silver cannot continue to meet the gap between supply and demand. The supply of recycled silver dropped 24% last year, which is the largest decrease on record. Supply is also falling. Seven of the ten leading silver mines produced less silver in 2013 than in 2012. Production in the Silver State, Nevada, is down 70.4% over the past 16 years. The US Geological Survey reports that ore grades have collapsed 90%, which means that far more ore has to be mined in order to produce the same amount of silver. Exploration has also come to almost a complete halt due to higher financing costs, so there is little chance of new finds of sources of silver.
On the demand side, physical demand has increased 13%. Last year the U.S. Mint actually sold out of silver products, reports said. China’s use of silver for solar panels was less than 1 million in ounces in 2005, but in 2013 China used 35 million ounces just for solar panels. In 1999, the amount of silver used in solar panels in the United States was not even reported. By 2015, 100 million ounces of silver are projected for solar energy use.
Some 62% of silver is used for industrial applications, 21% for jewelry, and 12% for coins. Given these used, the data argues that “95% of all silver consumed is gone, never to enter the supply side again.”
Even so, “A real shortage in the physical markets is being completely ignored.”
The paper silver market, Comex, sells 100 ounces of paper silver for every single ounce of physical silver available. The Comex price has been depressed by shorts, which are near record highs. The shorts are not held by producers locking in prices. The shorts have been purchased by banks, the CFTC, US Treasury and the Federal Reserve. The shorts have, “Crushed the price of silver,” and mining shares.
Given the demand for silver, however, low prices cannot last forever. “The silver shorts will be squeezed because of the real physical shortage that is upon is,” the story argues. When that happens, the price of paper and physical silver will rise dramatically. Today investors have an opportunity to own silver at a price less than the cost to produce it. The upside potential for silver is tremendous due to the huge and growing gap between supply and demand.
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The Equity Management Academy recently reported that “Right now there is a severe shortage brewing in the silver markets that could easily double or triple your money in 2015.” Learn more here.
