Silver Investing Hits Record, Scrap "Exhausted" on 2013 Price Crash
Thursday, 5/15/2014 09:56
Silver jewelry demand also hits record, driven by China, as investing grows 75%...
SILVER INVESTING in coin and bar hit record levels as prices fell in 2013, while recycled scrap flows from existing owners sank by one quarter worldwide according to the market's authoritative report.
Investment bar and coin demand jumped 76% according to the new Silver Survey 2014, produced by Thomson Reuters GFMS for the Silver Institute in Washington, which represents all sides of the silver industry, from miners to refiners and industrial users.
Scrap supply in contrast "fell spectacularly", down 24% on the data compiled by GFMS, "the largest drop since at least the 1980s [to] the lowest level since 2001."
2013 saw silver prices average $23.79 per ounce, down almost one quarter from 2012 and hitting 4-year lows beneath $20 per ounce.
The US stock market returned more than 30% to investors in total.
Alongside the surge in physical retail investing demand, stockpiles of
silver bullion bars held for shareholders in exchange-traded trust funds held steady, ticking higher even as gold ETF holdings fell by almost one-third.
But betting on higher silver investment prices by non-industry players in the Comex futures market, net of their bearish bets as a group, fell 45% says Thomson Reuters GFMS, shrinking by the equivalent of 103 million ounces – some 10% of the physical market's 2013 offtake.
While silver mine output continued to expand, sales of existing above-ground stocks from consumers collapsed last year says GFMS, citing the price drop which spurred the corresponding leap in silver investing and also jewelry demand, up 9.6% to nearly 200 million ounces, some one-fifth of the market.
Indeed, with consumers worldwide growing their silver investing and jewelry holdings, rather than selling them down, "The majority of precious metals refineries struggled to source scrap in 2013," says the Silver Survey 2014, "and declines of over 30% [from 2012] were not uncommon."
"Crucial to this decline" says the report "was softer silver prices." But other factors worked to reduce scrap flows, GFMS's analysts add, pointing to "a tightening regulatory environment" and also "an exhaustion of 'distressed' selling" in Western industrialized nations, as the financial crisis receded further.
Electronic scrap (so-called "e-scrap") did rise, however, as did the flow of metal reclaimed from
silver catalysis in EO production. Ethylene oxide is a key ingredient in many domestic and industrial solvents, detergents and other chemicals.
Despite the drop in prices, industrial demand fell for a third year running.
Squaring the growth in silver investing and jewelry demand with the 2013 crash, "The decline in silver prices last year was driven primarily by investor liquidations of silver futures and options positions on exchanges," says GFMS, plus "large-scale sales from investors of physical inventories.
"While silver held by investors in exchange traded funds were stable, sales of unreported investor inventories took place throughout the year."
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