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Silver miners unlikely to meet demand despite rising prices

Silver miners unlikely to meet demand despite rising prices

GrafaGrafa2024/10/08 02:30
By:Isaac Francis

The silver market is facing a prolonged supply deficit due to rising demand and the complexities of extraction.

Despite current high prices, silver production is not expected to increase in the short or medium term due to high extraction costs and the lengthy process of developing new mines.

Metals Focus, a metals research consultancy, recently reported that the silver market has been in a three-year supply deficit.

The demand for silver has been driven by tech-related industries, particularly for electric panels.

Despite this demand surge, silver production is expected to fall short by 62.8 million ounces compared to its peak in 2016, when 900 million ounces were produced.

The consultancy stated that “mine supply growth is likely to remain modest, with only minimal increases globally.”

A significant portion of silver is extracted from mines focused on other metals, such as copper, lead, and zinc, which limits the impact of silver price increases on production levels.

Even primary silver mines, which account for 28% of the metal's total output, face challenges in increasing production due to rising extraction costs that outpace gains from the current bull market.

As a result, production hikes would still depend on miners' capital allocation decisions.

According to Metals Focus, even if miners began developing new mines, the time required for this process means that production increases will not meet rising demand in the near future.

The consultancy explained that it is "implausible that new production could balance the current deficits over the short to medium term."

Instead, any resolution to the shortfalls will likely rely on recycling efforts and adjustments in demand in response to expected price increases.

Peter Krauth, a silver market analyst, had previously predicted this scenario, suggesting that high demand was being met by tapping into existing inventories from silver futures markets.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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