Fabrication demand is forecast to grow by 4% in 2011. Industrial offtake is set to rise, in spite of the Japanese earthquake, weak economic growth in western economies and the end of stock replenishment. Jewellery demand is likely to edge higher despite stronger silver prices, while silverware and photography will weaken further. Demand for coins and medals, however, is set to establish a new record high, achieving the largest gain, in volume terms, of any category of fabrication demand in 2011. Supply – further, noteworthy gains are forecast for mine production and scrap in 2011, although these will be countered by a heavy fall in government sales and, to a lesser extent, producer hedging.
Thomson Reuters GFMS forecast the annual average price in 2011 at $35.66, up by a noteworthy 77% year-on-year. The rally is expected to extend into next year, reaching an annual average, in terms of the consultancy’s Base Case, of over $45 in 2012.

The key points from this review are as follows:
• Total supply is expected to remain broadly stable in 2011, as growth in mine production and scrap offset lower government sales and producer hedging. Total supply is set to rise next year, thanks mainly to a lift in mine supply
• Mine production is anticipated to grow by 4% in 2011, for the ninth year in succession. Gains are centred on Mexico (mainly from the ramp-up of Goldcorp’s Peñasquito and the start of commercial production at Fresnillo’s Saucito), China and Russia, while declines are limited, with Australia, Peru and the US the only three of note. Globally, output from primary silver mines is expected to increase marginally year-on-year, with the majority of growth in 2011 driven by higher by-product silver production from gold and lead/zinc operations. Global silver mine supply is expected to maintain its upward trend in 2012, rising to an eighth consecutive all-time high
• Scrap supply is forecast to rise by almost 10% this year, thanks to growing receipts from industrial and jewellery sources and despite the ongoing structural slide in recovery from photographic waste, the main source of silver recycling. Further losses from photographic waste will dampen the anticipated gains (in the global total) currently slated for 2012.
• Government sales are projected to fall sharply in 2011, chiefl y due to falling sales by CIS countries. The full year total in 2011 will represent the lowest volume seen in over a decade
• Fabrication demand is forecast to rise by almost 4% this year to a new record high, with further, albeit more modest growth predicted for 2012
• Industrial demand will reach a new record high in 2011, with a near 4% gain. The percentage gain appears more noteworthy, given the adverse impact stemming from Japan’s natural disaster and the generally weaker economic backdrop (compared with 2010). In addition, there was little sign of the substantial inventory build, which had benefited industrial silver fabrication in 2010. Next year, although further gains are forecast for global industrial demand these are likely to be modest, a refl ection of the slowdown in world economic growth expected in 2012.