Silver primary supply set to recover in 2021, following Covid-19 operational restrictions suffered last year. 2020 saw the silver mining industry's biggest fall of the last decade, down 6% to 784 million ounce, based on Metals Focus data. Mined-output may rise by 8% year-over-year to 849 million ounces in 2021, based on Metals Focus estimates. We believe the Americas, with a 58% of global supply share, will lead the recovery in 2021, thanks to higher output from Mexico, Peru and Bolivia. Mexico could stay as the world's No. 2 producer, with nearly 200 million ounces, up 12% based on BI's scenario analysis.

Fresnillo kept its crown as world's No. 1 silver producing company in 2020, followed by KGHM, Glencore, Newmont and Codelco. We calculated that these miners combined represented 23% of global mined supply.

Eoin Treacy's view

Silver is mostly produced as a by-production of other mining activity and the majority of pureplay silver miners now concentrate on gold. Additionally, silver is more of an industrial resource than gold so it tends to elicit interest from many different sources. Those complicated supply and demand fundamentals mean significant new sources of supply or demand are required to meaningfully change the outlook for prices. The loss of photographic film demand was a major hit meanwhile the building boom in solar cells now accounts for 10% of total demand. 

Fresnillo is the world’s largest silver producer but gold accounts for half of revenue and 37% from silver. The share has trended lower over the last year because of disappointing production and grades. However, it is also one of the easiest ways to play silver via the stock market so it tends to respond well to improving precious metals sentiment.

Silver rebounded impressively today and the whole nine-month range looks like a first step above the base formation.

Gold closed above the psychological $1800 level today to push back above the trend mean for the first time since February. The recovery inflation hedges should help to lend further support to the bull market hypothesis for gold but investors will also be looking for some evidence that the linkage between bond and gold has been broken before committing resources in size.

There has been a great deal of interest in the argument bitcoin has robbed gold of potential flows over the last nine months. That argument also runs the other way around. It is quite possible that gold will benefit as the heat comes out of the bitcoin bull.