Global silver jewellery fabrication demand soared to 6.5 million ounces (Moz) in 2015, the Silver Institute said while releasing its annual World Silver Survey 2015, produced on its behalf by the GFMS team at Thomson Reuters (GFMS). The report said that the increase was largely driven by a 16% jump in fabrication in India ad Thailand and a 5% increase in North America, which together offset a sizable contraction in Chinese offtake.

The surge in jewellery fabrication demand, together with increases in the offtake due to higher demand for coins & bars, as well as from the photovoltaic sector, saw global silver demand also reach a record high of 1.17 billion ounces during the year. Even silverware fabrication enjoyed its third successive annual rise to an estimated 62.9 Moz, a ten-year high.

Identifiable investment, which includes physical bar investment, coins and medals, and exchange traded products (ETP) build, shot up 16% to a near record high, with coin and bar investment surging 24% to reach 292.3 Moz, the highest annual demand level in GFMS’ records.  Coin and bar demand accounted for 25% of total physical demand in 2015, the highest market share on record and up from just 5% a decade earlier. Silver coin and medal demand amounted to 134.1 Moz of demand last year due to unprecedented growth in several key markets, notably the United States and India.

However, the impact of the global economic slowdown was seen in a 4% drop in the largest component of physical silver demand, industrial applications, which accounted for 50% of total physical silver demand last year. The segment accounted for 588.7 Moz, with the drop largely due to weaker fabrication demand in developing countries and a stagnant global economy. 

Within the segment, there was a mixed performance. Electrical and electronics use declined by 10%, and photography demand by 4%. Demand from the brazing alloys and solders sector was also down. But, demand for photovoltaic applications rose 23%, driven by strong growth in Chinese solar panel installations and silver demand for ethylene oxide (EO) grew an impressive 103%.

On the supply side, global silver mine production growth slowed to 2% in 2015 and reached a record 886.7 Moz, while scrap supply was significantly down by 13% at 146.1 Moz, the lowest volume level recorded since 1992 and the fourth consecutive year of decline. 

Increased demand, coupled with lower supply, particularly weakness in scrap sales, led to the third successive annual silver market deficit, reaching 129.8 million ounces (Moz), more than 60% larger than 2014 and the third largest on record. 

The continued slowdown in Chinese economic growth and a stronger US dollar, created a challenging environment for most commodities and led to a lower average annual silver price of US$15.68/oz in 2015.  However, this lower price environment helped to boost physical demand, particularly as long term investors viewed lower prices as key entry points in expectation of future price appreciation.