Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Global demand for silver will decline by 9.4% this year largely due to a drop in investment, but the market will maintain a deficit, according to a report from Chilean state agency Cochilco.
“The drop in demand would originate, fundamentally, from the decline in physical investment in silver in 2023, given a lower participation of Indian investors compared to 2022,” Cochilco’s executive vice president, Joaquín Morales told Reuters.
He added that Indian investors were “especially active” last year. The industrial sector will be the largest silver consumer this year, followed by physical investment in the metal, adding up to 35,019 metric tons compared to 38,643 tons in 2022.
Industrial demand is increasing due to the growing solar energy and the electric vehicle industries, the report noted.
Despite the drop in demand, supply for 2023 is expected to reach 31,815 tons, an increase of 1.8%. This is due to better prospects for mining production.
At the end of July, silver reached $24.40 per ounce, up 1.7% from the end 2022. The average price for 2023 is expected to reach $24.60.
Easing US inflation and a weak dollar buoyed the price of silver during the second quarter, according to the report.
This is due to the metal’s dual role as a precious metal and an industrial metal that rises in value when the dollar depreciates. Morales says the dollar is expected to weaken this year and is more relevant to the price “than the weakness of the Chinese economy.”
In 2022, the largest silver producers were Mexico, China, Peru, Poland and Russia. Fresnillo, KGHM, Newmont, Glencore and Hindustan Zinc are the largest silver producing companies.
Peru registered the biggest drop in production with a decrease of 7%, but Morales says “an increase in production is expected by 2023.”
(By Fabián Andrés Cambero and Alexander Villegas; Editing by David Gregorio)
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