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£3,218.49 OZ
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£48.61 OZ
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£1,360.89 OZ
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Silver’s above-ground stock levels have experienced dynamic shifts in recent years, with profound implications for the metal’s future market dynamics as levels of above-ground stocks have a huge impact on how tight the physical Silver market will become and how well it will respond to short-term demand spikes
By examining the trends and contextual factors influencing silver supply and demand, we can better understand the current state of above-ground inventories and their potential trajectory based on forecast mining supply and demand. The physical Silver market deficit of 2021 and 2022 have caused signifciant drawdowns on inventories of Silver, taking stocks down from 22 months of supply in 2020 to just 12.3 months by 2024
A look at Silver’s above-ground inventories and how this is changing annually. The amount of months supply that the reserves represent is also illustrated
The deficits in silver above-ground stocks recorded in 2021 and 2022 have reversed the cumulative gains seen between 2010 and 2020. During that decade, surplus production contributed to significant inventory builds, bolstering above-ground stocks
Recent years have seen these surpluses eroded by rising industrial demand and constrained mine production. The deficits of 2021 and 2022 alone effectively wiped out the gains of the previous decade, underscoring a tightening trend in the silver market
Despite these deficits, above-ground stocks remain substantial. For instance, London vaulted stocks alone exceeded a year’s worth of global mine production at the end of 2023. When combined with exchange-registered inventories, these holdings equate to nearly 15 months of global supply.
2024 became the sixth straight year in which demand for physical Silver exceeded supply from mines and recycling combined. From official data we can see that a lot of the demand growth is in China which is evident from withdrawals of Silver from the Shanghai Gold Exchange
Signs of tightening in the silver market are emerging in specific regions, most notably China. Historically, China has been characterised by local oversupply, significant exports, and silver prices trading at a discount to London benchmarks.
However, since late 2023, these dynamics have begun to shift. Discounts have narrowed and, more recently, turned into small premiums, while exports have come under pressure. These changes suggest that local inventories are being drawn down, signaling potential tightening in global supply-demand balances.
With industrial Silver demand surpassing 700 million ounces for the first time in 2024 after 654.4 million ounces consumed in 2023, the final stock levels for 2024 will show a further erosion of Silver from storage. We will update the chart above when the data is published by The Silver Institute
Silver above-ground stocks are mostly influenced by changes in demand but supply can still have an impact on the rate of storage build or drawdown
One of the key challenges facing the silver price is the persistent overhang of high above-ground inventories. This surplus supply has reduced speculative interest in silver as investors weigh its prospects against those of competing assets such as technology stocks and cryptocurrencies which can offer faster gains. Rangebound Silver prices have offered little incentive for speculative positioning.
The sputtering performance of the Chinese economy has weighed on industrial demand expectations, despite robust actual consumption in sectors such as photovoltaics. Of the drawdowns in inventories seen in recent years, China has seen the most aggressive drawdowns
Silver’s mine supply has faced challenges in recent years. Global mine production fell by 1% year-on-year to 830.5 million ounces (25,830 tonnes) in 2023. This decline was driven by a four-month suspension of operations at Newmont’s Peñasquito mine in Mexico due to labor strikes, lower ore grades at certain mines in Argentina and the closure of Pan American Silver’s Manantial Espejo mine.
Global Silver mine production typically produces just over 800mn ounces of Silver which equates to 22680 tonnes of Silver. silver mine production is expected to increase from 2025, as new projects come online. Significant contributions are anticipated from primary mines such as Rochester, Uchucchacua, and Zgounder, as well as gold operations like Peñasquito and Salares Norte. However, beyond these initial gains, production may face challenges as reserve depletion begins to outweigh new supply.
While above-ground stocks of silver remain high, continued deficits are gradually drawing down these inventories. Over time, this trend is expected to tighten the market, leading to upward pressure on prices. The emerging signs of tightening in China provide a glimpse of what may lie ahead for the broader silver market. As inventories shrink and demand continues to grow, particularly from green economy applications, silver’s long-term prospects remain strong.
The current state of silver’s above-ground stocks reflects a complex interplay of supply, demand, and investor sentiment. While challenges persist, particularly in the form of high inventories and subdued speculative interest, the structural drivers of demand and the finite nature of inventories suggest that silver’s time to shine is on the horizon. As deficits continue to chip away at above-ground stocks, the stage is set for a tighter market and potentially higher prices in the years to come.
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