The silver shortage is growing, with another annual shortage on the silver market. The silver price reacts gently to this. Something has to happen and it will probably be the silver price that has to break through the resistance.
RELATED – When Exactly Will Silver Reach $50 an Ounce?
Recent data published by The Silver Institute supports our 2025 silver forecast of $49/oz.
2024 is expected to be the fourth consecutive year of silver market shortages, i.e., demand exceeding supply, causing above-ground inventories to drain. Everyone can see that this shortage is likely to persist despite changing market conditions, such as increasing silver recycling.
Silver Institute The 2024 interim market report has recently been released. Record industrial demand for silver and 4th shortage in a row expected. See what else Metals Focus predicts for the silver market in 2004. See: https://t.co/7NC9FNxRZ1 pic.twitter.com/UWWasmIM0U
— The Silver Institute (@SilverInstitute) December 17, 2024
Industrial demand is growing
Industrial demand for silver is expected to reach a new record high in 2024 over 700 million ounces (Moz) for the first time.
As a result, demand for industrial silver has increased by 7% in 2024 compared to the previous year.
A major factor contributing to this increase in demand is silver’s role in key sectors such as renewable energy and electronics technologies. Silver’s presence photovoltaic cells and his growing input into in electric vehicles highlight its importance in the carbon reduction transition, which, given strong commitments from Western governments, will continue to support silver demand.
The imbalance between supply and demand
Global demand for silver is expected to increase up 1% year-on-year to 1.21 billion ounces in 2024. While this increase is modest compared to previous years, it shows how demand remains strong despite increases in silver spot prices. Silver rose 34% in 2023 and is expected to close 2024 24% higher.
The market shortage is due to the increase in demand since 2020. The total demand for silver was 926.8 million ounces in 2020 and by 2021 it had increased to 1.1 billion ounces. 2022 surpassed this with demand of 1.28 billion ounces. Despite a slight decline to 1.19 billion ounces in 2023, demand is expected to pick up again to 1.21 billion ounces in 2024.
On the supply side silver production has remained relatively stable has fluctuated within a narrow range of 950 to 1,050 million ounces per year over the past decade.
- Recycling rates have increased as higher silver prices encourage sales of silver to be put back on the market. Even at this faster rate, recycling has not been able to reduce the deficit.
With demand growth outpacing the limited supply of silver, the market has experienced a shortage over the past four years.
Latest estimate from the Silver Institute: a shortage of 282 million ounces by 2024, the sixth straight year of shortages, and the largest since the 2020 blowout.
Note how the shortage is increasingly driven by industrial applications (especially in the last four years) – sectors… pic.twitter.com/RujVhsmnH8
— HK Nik (@hk_nik) November 14, 2024
Another annual shortage on the silver market
The silver market equilibrium over the past decade shows a clear trend of increasing shortages, which has become more prominent since 2021:
- 2015: -18.4 Moz
- 2016: +54.7 Moz
- 2017: +40.5 Moz
- 2018: +1.3 Moz
- 2019: -4.1 Moz
- 2020: +30.6 Moz
- 2021: -95.4 Moz
- 2022: -263.5 Moz (the largest recorded deficit)
- 2023: -184.3 Moz
- 2024: -215.3 Moz
These numbers illustrate a growing structural deficit in the silver market, providing fundamental justification for our 2025 technical target of $49/oz..
Physical silver market trends
Physical investment in Silver bars and coins are expected to fall by 15% in 2024, with a four-year low of 208 Moz. This decline reflects subdued retail investment activity, especially in the United States, where coin and bar sales are expected to fall 40% to their lowest level since 2019.
It is thought that the lack of a new macroeconomic crisis this year has reduced demand for silver as a safe haven. On the contrary, Indian demand for silver investments has been boosted by the reduction in import duties on silver bullion.
Price implications of a new silver market shortage
Four consecutive years of market shortages will deplete above-ground supplies, keeping further pressure on prices. This is a key reason why many analysts expect silver to build on its recent price gains.
Despite modest increases in recycling rates, current supply-demand dynamics suggest that the only realistic way to fill the gap in the short term is for prices to rise high enough to encourage sales in much higher volumes.
Absent a major economic recession or a sharp collapse in industrial demand, silver prices are expected to rise further in 2025 as the market searches for equilibrium.
Written by Levi Donohoe.
Final edit by Taki Tsaklanos.