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Total Physical Silver Demand Achieves Record Level in 2013

Wednesday, May 14th

(New York City – May 14, 2014) Total physical silver demand rose by 13 percent in 2013 to an all-time high, according to “World Silver Survey 2014″, released today by the Silver Institute. This was primarily driven by the 76 percent increase in retail investment in bars and coins coupled with a sturdy recovery in jewelry and silverware fabrication. On the supply side, silver scrap fell by 24 percent, experiencing the largest drop on record to reach its lowest level since 2001. The silver price averaged $23.79 in 2013, the third highest nominal average price on record, in a particularly volatile year for the entire precious metals complex.

Silver Fabrication Demand

Total physical demand for silver stood at a record 1,081 million ounces (Moz) last year. The largest component of physical silver demand, industrial applications, dipped by less than 1 percent to 586.6 Moz, to account for 54 percent of total physical silver demand. Asia, however, experienced a 3 percent increase in silver industrial demand, led by China, where a continued recovery in the electrical and electronics sector, along with gains in the Chinese ethylene oxide industry, took total Asian industrial offtake to a new high. Japan also experienced gains in silver industrial demand.

Last year’s recovery in jewelry fabrication was a reflection of the improved economic outlook in the industrialized world, which lifted consumer confidence and retail sales for a 10 percent increase in jewelry demand. Global silverware fabrication rose 12 percent to a three-year high, due to strong gains in India and China, while photography demand slipped by 7 percent in 2013, posting the slowest percentage decline in nine years.

Silver Mine Supply and Costs

Silver mine production grew by 3.4 percent to reach 819 Moz. A large portion of the growth is attributable to the primary silver mining sector, which experienced strong growth from the start, along with the ramp-up of operations that entered production in recent years. Primary silver mine production grew 6 percent, and accounted for 29 percent of global silver mine supply. Mexico was the world’s leading silver producer, followed by Peru, China, Australia and Russia. Primary silver mine cash costs stood at US$9.27 an ounce, increasing 1 percent in dollar terms. The producer silver hedge book was aggressively reduced last year to stand at 15 Moz on a delta-adjusted basis.

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