Silver price to remain high on investor interest

The VM Group’s first Silver Book says industrial recycling is higher than thought and industrial end uses for silver are emerging.

JOHANNESBURG - 

The silver price is likely to remain in the $10-15/ounce range, despite the fact that the market remains in surplus.

The Fortis/VM Group said in its debut Silver Book publication the silver price has recovered and is following an "upward trajectory" as the silver investor has returned.

Although the silver market continues to be prone to surplus due to levels of aboveground stock, the investor could have absorbed the surplus and demanded even more of the metal - sparking the rise in price.

"We believe the silver price is likely to remain high, while the investment boom in commodities remains intact," said the publication.

Silver mine production will remain largely insensitive to movements in price, as silver is recovered as a by-product of copper, lead, zinc and gold.

Another source of supply, industrial recycling, is likely to be much higher than information in the public domain implies. Silver recovery from photographic waste is more efficient than previously thought and recycling from electronic waste is likely to become increasingly important in the next three to four years.

However, recycling volumes from the photographic recycling model will decline in future years with the fall in use of traditional photographic film.

On the demand side, a number of new industrial end uses of silver are starting to emerge as commercially viable.

Demand from these sectors will be zero in 2007, but many of these uses will grow rapidly from this zero base line and should be taken into account in any forecasting. 

"Collectively they are unlikely to take over where photography has left off in volume terms, but their potential contribution to supporting the silver supply/demand profile should not be underestimated.

"Importantly, these end uses are unlikely to become the source of large amounts of future recycling of the material," said the Book.

The VM Group does not have complete information on silver coinage, a relative small sector, producer hedge positions, comprising of relatively low figures, and the most recent official disposals of silver.

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