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Silver is the second most important and widely traded metal among the precious metals. Historical evidence suggests that the use of silver has been present since time immemorial. Similar to gold, silver is used for widely varied purposes from ornaments to medicinal purposes and to industrial applications.
Silver is a bright greyish white metal available in the earth’s crust. According to the reports of Silver Institute, the mining of silver began some 5000 years ago and was first mined in about 3000 B.C. in Anatolia, the present Turkey.
Jewellery: Silver is widely used in jewellery and fabrication either exclusively or along with gold.
Industrial application: Silver is widely used in industrial applications. In addition, silver is good conductor of heat and electricity and hence it is used in electrical contacts and conductors.
Silverware: it has been in Indian tradition and culture to use silverware for serving food and performing puja. It is considered a healthy option to eat or drink in silver utensils.
Photography is an important area of silver application.
Asset: It is also gaining popularity in the recent years as an investment alternative. It is used as component of global monetary reserves.
Important source of silver is lead ore. It is also available along with copper, zinc and gold ores. It is produced as a by-product when it is present along with other metals.
Production of silver can be two ways, as primary and as by-product while producing other commodities such as gold, copper and zinc. In India has been producing silver as a by-product of refining zinc and copper and is extracted through electrolysis or chemical methods.
World silver mine production has increased consistently from about 600 million ounces in 2003 to a record high of 787 million ounces in 2013. Of total mine output, primary production has increased from about 160 million ounces to 221 million ounces while that of by-product from the production of gold, lead and zinc has gone up from 450 million ounces to 680 million ounces in the corresponding period. On the other hand, recycled gold stood at about 250 million ounces in the recent years about 25% of total silver supply in the world.
Mexico is the single largest silver producing country in the world accounting for about 12% of world silver production followed by Peru with 9%, China with 8% and Australia with 4% share.
World consumption demand for silver is about one billion ounces as indicated by the World Silver Survey 2013. The U.S. is the largest consuming country contributing for about 22% of world silver consumption followed by China with about 15%, Japan with 12% and India with about 11% of share. Rest of the consumption is scattered across a large number of countries.
Table 1: Trends in world silver production and consumption (million ounces)
Source: World Silver Survey 2013, Thomson Reuters GFMS
Silver is largely utilised in industrial applications to an extent of about 45 to 50% followed by jewellery to an extent of 15 to 20%, coinage about 10% and photography about 5-6% of total silver consumption demand in the world. Investment demand has increased over the past decade and it account for about 15 to 18% of total demand. Demand for investment has increased significantly while that for photography has declined drastically during the recent years primarily due to high prices.
There are no exclusive silver deposits in India and silver is mostly occurring along with lead, zinc and gold India’s silver resources are estimated at 466.9 million tonne, containing 27.63 thousand tons of silver. India’s production of silver has gone up from about 40 to 50 tons to about 207 tons in 2011-12. Rajasthan is the major producing state accounting for about 87% followed by Andhra Pradesh with 5% and Karnataka with 4% share.
Domestic demand for silver is apparently regaining the levels of the early 2000s. Consumption demand for silver was at about 3500 to 4000 tons per year during 2000 to 2005 but it moderated in the subsequent years and stood at 1500 tonne in 2009-10. Nevertheless, demand for silver once again regained and it went up to 2800 tons in 2010-11 and further to 4000 tons in 2011-12. Further, it is expected to go up to 6000 tons by 2017 as per the estimates of the Working Group on Mineral Exploration and Development.
Table 2: Domestic demand and supply of silver (tons)
Source: Indian Bureau of Mines, Trade Sources
Domestic Spot markets: Mumbai, Ahmedabad, Jaipur.
International: COMEX, London Bullion Market Association for OTC forwards.
Domestic: MCX, NCDEX, NMCE
India is one of the largest importers of silver in the world. However, India also exports minor quantities of silver.
Major export destinations: US, Belgium
Major import sources: China, UK, EU, Australia, Switzerland and Russia.
Factors Influencing Prices:
· Supply situation from mine production as well as recycling.
· Global macro-economic developments.
· Socio-political events in major producing and consuming countries.
· External trade policies, tariffs and restrictions by the country.
· Domestic inflation and other economic developments.