This page has been archived and commenting is disabled.

OFFICIAL RELEASE: World Silver Deficits –12 Years Running

Sprott Money's picture




 

 

 

 

 

OFFICIAL RELEASE: World Silver Deficits –12 Years Running 

Posted with permission and written by Steve St. Angelo of SRSrocco Report 

(CLICK FOR ORIGINAL)

 

 

 

According to the recently released Silver Institute 2015 Interim Report, the world experienced annual silver net deficits for 12 years running. This is surprising as the Silver Institute actually reported a small net surplus of silver in 2014. However, the small silver surplus turned into a deficit when 2014 mine supply and total demand figures were revised.

If we look at the chart below (using last year’s data), annual silver deficits were reported until 2013 and then turned into a surplus in 2014:

This was Chart #48 from THE SILVER CHART REPORT, released earlier this year. Going by this data, the world suffered a cumulative net deficit of 930 million oz (Moz) for the past decade (2005-2014). The annual net balance figure is calculated using data from Thomson Reuters GFMS provided for the Silver Institute.

The annual net balance figure is comprised by first subtracting total physical demand from total supply. This is their “Physical Surplus or Deficit figure.” They then take this physical surplus or deficit figure and add or subtract net changes in Silver ETFs and Exchange Inventories. The end result is a “Net Balance.” Basically, the annual net silver balance also takes into account the build or decline of Silver ETFs and Exchange inventories.

Even though Thomson Reuters GFMS reported a small silver surplus in 2014, I knew it was going to be revised lower to a deficit. Why? Because my analysis showed that they overestimated mine supply and underestimated physical investment demand.

For example, Thomson Reuters GFMS reported 2014 Mexican silver production of 193 million oz (Moz) at the Silver Institute, whereas my figures (taken directly from Mexico INEGI) shown in Chart #8 in THE SILVER CHART REPORT, list actual production at 184.2 Moz. Mexico INEGI’s just revised their 2014 silver production figure to 185.3 Moz.

World Suffers Consecutive Net Deficits For 12 Years Running

If we take the data from the Silver Institute’s 2015 Interim Report and 2014 World Silver Survey, the world experienced consecutive silver deficits for the past 12 years:

NOTE: The 2015 figure should read 2015 Est. (estimated). Actually, I believe the 2015 net deficit of 21.3 Moz will be even higher when they revise the data next year. I will get into more detail on this in following articles, but I believe estimated 2015 Silver Bar & Coin demand was under reported by a large percentage.

That being said, the 2014 small net surplus of 2.6 Moz turned into a deficit of 21.3 Moz due to global silver mine supply being revised lower by 12 Moz to 865 Moz from 877 Moz reported last year, while total Silver Bar & Coin demand was revised higher to 203.5 Moz versus 196 Moz stated last year. These two revisions accounted for the majority of the net -23.9 Moz change.

Adding up all the annual deficits from the period 2004-2015, the world suffered a cumulative shortfall of more than a billion ounces of silver… 1,021 Moz to be exact. That’s a lot of silver. So, where did it all come from and does it really matter?

When Do The Silver Fundamentals Matter?

This is the question an increasing number of precious metal investors are asking themselves. I know this first hand as this is the question I get emailed the most from my readers. Unfortunately, the fundamentals don’t provide the EXACT TIME when the fundamentals matter, but rather present data about the ongoing TREND that offers us a some important CLUES.

Here is an excerpt from the Silver Institute 2015 Interim Report on the subject of physical deficits:

The silver market is expected to be in an annual physical deficit of 42.7 Moz in 2015, marking the third consecutive year the market has realized an annual physical shortfall.While such deficits do not necessarily influence prices in the near term, multiple years of annual deficits can begin to apply upward pressure to prices in subsequent periods. This year, however, net outflows from ETF holdings and derivatives exchange inventories on a year-to-date basis have lessened the impact of the physical deficit, bringing the net balance to ?21.3 Moz.

Remember, the estimated physical silver deficit of 42.7 Moz in 2015 does not factor in the net change of Silver ETFs and Exchange Inventories… which was a net decline of 21.4 Moz (as of Sept 2015).

Regardless, the important item to focus on in the quote above is the statement, “multiple years of annual deficits can begin to apply upward pressure to prices in subsequent periods.” What is interesting here (not discussed in the Interim Report) is that net silver deficits have been now going on for 12 consecutive years when we also include builds in Silver ETFs and Exchange Inventories.

We must remember, the large build in Global Silver ETF inventories (2006-2010) had to come from physical silver supplied by the market. According to the Silver Institute, the total cumulative build in Global Silver ETFs was 569 Moz for the five-year period….. 2006-2010.

So, where did all this silver come from to supply a 1+ billion oz shortfall over the past 12 years? That is the trillion dollar question. I believe this billion oz shortfall was supplemented from a source known as “Unreported Above-ground Stocks.” While this figure is nothing more than a good guess by various official sources, it has fallen precipitously since the 1990’s.

The CPM Group stated that “Implied Unreported Silver Stocks” reached a peak of 2.2 billion oz (approximate figure) in 1990 and fell to less than 200 Moz in 2014. This draw-down of unreported above-ground stocks supplemented both the annual physical supply deficits and builds in Global Silver ETFs over the past 35 years.

While it’s impossible to know how much remaining silver (from unreported above-ground stocks) can be used to supplement ongoing annual deficits going forward, there’s probably a lot less than we realize. Furthermore, the segment of the silver investment market that was impacted the most during the rapid 60% fall in the silver price was Global Silver ETFs.

As I stated above, from 2006-2010, the net build of Global Silver ETFs were 569 Moz. However, from 2011-2015, the net increase in Global Silver ETFs were a paltry 18.2 Moz. What happened if the price of silver continued to rise 2012-2015? Main Stream investors would have piled into the Silver ETFs pushing up their total global inventories. Rising Global Silver ETF inventories on top of rising physical Silver Bar & Coin demand would have put a real strain on remaining “Unreported Above-Ground Stocks.”

Even though precious metal sentiment is now probably at all time lows, investors need to realize NOTHING HAS BEEN FIXED in the Global Financial Markets. Yes, it’s true that the propping up of the markets by the Fed and Central Banks has gone on longer than we realized, the unraveling of the World’s Greatest Financial Ponzi Scheme is still on its way.

 

 

 

 

Please email with any questions about this interview, precious metals, or to receive these in your inbox HERE.

 


 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 11/26/2015 - 22:13 | 6844222 InnVestuhrr
InnVestuhrr's picture

Maybe all the silver solder that I use is contributing to the deficit ?

The industrial uses of silver are the ONLY ones that make sense to me, unless you are capable of travelling back in time.

Thu, 11/26/2015 - 11:05 | 6842344 Latitude25
Latitude25's picture

OK a huge deficit.  Then where did the silver come from to fulfill actual physical demand?  Thin air?

Thu, 11/26/2015 - 11:29 | 6842454 Clint Liquor
Clint Liquor's picture

Although a firm number is impossible, it has been estimated (based on historic production and consumption) there is approximately 16 billion oz of mined silver in the world. From old coins and religious figures to Grandma's tea set, there is alot of silver out there. At what price Grandma scraps her tea set, noone can know.

Thu, 11/26/2015 - 21:10 | 6844081 Squid-puppets a...
Squid-puppets a-go-go's picture

lots of that is gone for good. you cant recycle silver from the photography industry

Fri, 11/27/2015 - 01:10 | 6844667 crazytechnician
crazytechnician's picture

That's total  BS - This department of Kodak have specialised in silver recovery for atleast 130 years,~

http://www.kodak.com/global/mul/corp/img/landing/silverRecoveryLdg.jhtml

Thu, 11/26/2015 - 10:39 | 6842240 Fukushima Fricassee
Fukushima Fricassee's picture

You bet your ass the Jew FED board members each have a fucking hord and adding to it all while talking you out of it.

Thu, 11/26/2015 - 19:51 | 6843927 crazytechnician
crazytechnician's picture

They very likely don't have a metal's position , they are just laughing their asses off at you muppets who think ther will be a return to a metal standard, And this Anti-Jewish rhetoric makes you sound even more like a fucking idiot.

Thu, 11/26/2015 - 10:16 | 6842172 Beowulf55
Beowulf55's picture

32-35,000 tons short...............AND WHAT?  Is that going to change the price of silver and when?  FTC doesn't seem concerned.  Wake me when silver is over $50 dollars.

Thu, 11/26/2015 - 10:07 | 6842140 Holleyman
Holleyman's picture

Over 35,000 short tons

Thu, 11/26/2015 - 07:47 | 6841806 Seb
Seb's picture

1021 Moz is only 32 t (rounded up).

Thu, 11/26/2015 - 09:50 | 6842082 DeadFred
DeadFred's picture

32,000 tons by my calcs. 1021 million troy oz, 1 billion oz.

Thu, 11/26/2015 - 19:48 | 6843923 crazytechnician
crazytechnician's picture

This is all just a load of fucking bollocks.

How the fuck can it be so cheap if there is a deficit for 12 years ?

The silver brigade have been fucking brainwashed big-time.

 

Anybody who thinks metals will go back to being money in circulation is a moron , get off the drugs and buy some bitcoin.

 

 

Thu, 11/26/2015 - 21:22 | 6844101 Bossman1967
Bossman1967's picture

Bitcoins electronic bullshit fiat. If the grid goes down how you gonna get you coinage. How do you know what a bitcoin is. That scheme is even more ponzi than that Madoff. So . I will keep my phyz untill the jizz comes outta the system and the new world order money is revealed then a new game starts and I can buy in. Monday the Juan will be added to the basket of reserve andits will all make sense. Bitcoin lmfao

Fri, 11/27/2015 - 01:19 | 6844662 crazytechnician
crazytechnician's picture

Yeah , when the entire planet's grid goes down you can finally get out your map of the Flat Earth so you can find that lake you have your stash buried under. You could then finally use your metal to buy more lead and loads more 30 years old stale prepper food. Yummmmyy.

Thu, 11/26/2015 - 21:15 | 6844088 Squid-puppets a...
Squid-puppets a-go-go's picture

pffffffffffffffffffffffft spilt my coffee

thanx for the laugh

metals prices can remain manipulated longer than the west can remain solvent

Fri, 11/27/2015 - 01:18 | 6844694 crazytechnician
crazytechnician's picture

u r welcome.

&

u hope ........

Thu, 11/26/2015 - 21:13 | 6844086 Spiritof42
Spiritof42's picture

Anybody who thinks metals will go back to being money in circulation is a moron , get off the drugs and buy some bitcoin.

That would certainly be a bad reason. There are better reasons having to do with possession, tangibility, privacy and ownership. I would never put my trust in bitcoin. It's too easy for the federales to confiscate or make illegal.

Fri, 11/27/2015 - 01:15 | 6844683 crazytechnician
crazytechnician's picture

"I would never put my trust in bitcoin. It's too easy for the federales to confiscate or make illegal."

 

- Ignorance of math and cryptography will do you no favours. Metals are far easier to confiscate , ever heard of a metal detector ? How about an X-Ray machine ?

Thu, 11/26/2015 - 10:35 | 6842232 Seb
Seb's picture

Yes, you are right, 32.000 t, not 32 t. My mistake.

Thu, 11/26/2015 - 10:43 | 6842262 oddjob
oddjob's picture

2015 Indian silver imports to reach 340 million oz (Moz) or 10,500 mt.

Do NOT follow this link or you will be banned from the site!