Silver Survey Update November Johann Wiebe, Lead Analyst, Precious Metals Demand

Transcription

1 Silver Survey Update November 2017 Johann Wiebe, Lead Analyst, Precious Metals Demand

2 THE SILVER MARKET IN 2017 SILVER PRICES DEMAND SUPPLY INVESTMENT PRICE OUTLOOK

3 SILVER PRICE IN DIFFERENT CURRENCIES IN 2017 Silver Price in different currencies Prices in different currencies on an intra year basis: Silver in Lira: + 4% US$: + 1% GBP: - 5% EUR: - 7% $/oz /kg /g Yen/g Rmb/g Lira/g Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Source: Thomson Reuters Eikon

4 SILVER PRICE RANGE, US$/OZ Source: Thomson Reuters Eikon

5 LONG TERM GOLD/SILVER RATIO (BASIS MONTHLY AVERAGE PRICES) Source: Thomson Reuters Eikon

6 THE SILVER MARKET IN 2017 PRICES DEMAND SUPPLY INVESTMENT OUTLOOK

7 WORLD SILVER SUPPLY AND DEMAND Moz e % % Mine Production % 6% Total Supply 988 1,051 1,043 1,007 1, % 2% Jewelry & Silverware % -5% Coins & Bars % -46% Industrial Fabrication % -4% Physical Demand 1,124 1,117 1,151 1, % -13% Physical Surplus/Deficit Annual Average Silver Price $/oz % -28% Source: GFMS, Thomson Reuters

8 WORLD PHYSICAL SILVER DEMAND ANNUAL CHANGES: vs (Moz) Moz Jewellery Coins & Bars Silverware Industrial Fabrication

9 REGIONAL WORLD PHYSICAL SILVER DEMAND FORECAST ANNUAL CHANGES: (Moz) Moz India China North America Europe Other Source: GFMS, Thomson Reuters

10 NORTH AMERICAN SILVER DEMAND FORECAST ANNUAL CHANGES: (Moz) Moz Jewelry Coins Bars Silverware Electronics Brazing Photo Solar EO Other Source: GFMS, Thomson Reuters

11 INDIAN SILVER IMPORTS Tonnes 900 Silver imports in tonnes 800 Fortnightly Tariff rates ($/kg) RHS Jan-16 Mar Jun Sep Jan-17 Mar Jun Sep Source: GFMS, Thomson Reuters $/KG

12 25 INDUSTRIAL FABRICATION FORECAST ANNUAL CHANGES: vs (Moz) Moz Electronics Brazing & Solders Photo Solar EO Other Ind Source: GFMS, Thomson Reuters

13 SOLAR DEMAND - SILVER POWDER FABRICATION Silver Demand Moz Japan US China f Source: GFMS, Thomson Reuters

14 DEMAND SUMMARY Physical silver demand expected to decline 5% to below 1bn ounces for first time since Strong decline in physical bar and coin demand which has been particularly driven by very weak sentiment in North America. Jewelry fabrication switched marginally positive from the weak sentiment last year. Solar demand remained again a positive outlier this year driven in large by capacity expansions in China and a triple growth in installations. Thrifting continued to weigh on electronics demand countered by increased electrification in industries such as automotive.

15 THE SILVER MARKET IN 2017 PRICES DEMAND SUPPLY INVESTMENT OUTLOOK

16 MINE PRODUCTION WINNERS AND LOSERS H VERSUS H1 2017

17 SILVER MINE PRODUCTION BY REGION Moz 1, Rest of the World Mexico Peru Chile China Russia Australia E Source: GFMS, Thomson Reuters

18 TOP 20 SILVER PRODUCERS Source: GFMS, Thomson Reuters

19 CAPITAL EXPENDITURE US$ Millions 1,100 1, Silver, US$/oz Dec-2012 Jun-2013 Dec-2013 Jun-2014 Dec-2014 Jun-2015 Dec-2015 Jun-2016 Dec-2016 Jun-2017 Capital Expenditure Silver Price Source: GFMS, Thomson Reuters

20 FCF PROGRESSION US$ Millions 2,000 1,500 1, ,000 Cash from Operating Activities Capital Expenditure Net Income Silver, US$/oz -1, Dec-2012 Jun-2013 Dec-2013 Jun-2014 Dec-2014 Jun-2015 Dec-2015 Jun-2016 Dec-2016 Jun-2017 Source: GFMS, Thomson Reuters

21 SILVER MINE PRODUCTION BY SOURCE METAL 26% Primary Silver 61% 13% Primary Gold Mines Primary Base Metals Mines Source: GFMS, Thomson Reuters

22 Silver Demand Moz WORLD SILVER SCRAP SUPPLY China India Europe North America ROW % Share of supply RHS 30% 25% 20% 15% 10% 5% f 0% Source: GFMS, Thomson Reuters

23 OUTSTANDING DELTA ADJUSTED PRODUCERS HEDGE POSITION Moz year-on-year change Net Hedging Net De-hedging f Source: GFMS, Thomson Reuters

24 SUPPLY SUMMARY Following a drop in mine production for the first time in 14 years, mine supply is set to fall another 2% this year. Supply from scrap marginally up this year mainly due to a rise in industrial generated waste. The hedge book is expected to contract by 3 Moz. Many players are at the side lines at current silver prices. Costs have risen slightly due to higher oil prices, production disruptions, lower grades and strong domestic currencies. Despite large fluctuations, primary silver miners are FCF positive indicating room for stronger capex further out.

25 THE SILVER MARKET IN 2017 PRICES DEMAND SUPPLY INVESTMENT OUTLOOK

26 WORLD SILVER IDENTIFIABLE INVESTMENT VOLUME AND VALUE Moz Coins & Bars ETP Inventory Build Total Identifiable Investment in US$ Bn (RHS) US$ Bn f Identifiable Investment is the sum of bars, coins and ETPs. Source: GFMS, Thomson Reuters

27 INVESTORS POSITIONS IN COMEX SILVER FUTURES & OPTIONS As of 14 th November

28 ABOVE GROUND STOCKS 3,000 2,500 Government ETFs Custodian Vaults Exchange * Industry 2,000 1,500 Moz 1, f As of end-q3. Custodian vault figures exclude ETF holdings Source: GFMS, Thomson Reuters

29 GLOBAL SILVER OTC TRANSFERS Bn oz US$, Trn Silver OTC Transfers, LHS Notional Value US$ Bn Source: LBMA; GFMS, Thomson Reuters

30 THE SILVER MARKET IN 2017 PRICES DEMAND SUPPLY INVESTMENT OUTLOOK

31 EQUITIES BULL RUN RHS: SP (yellow) LHS: FTSE (purple), DAX (blue) Source: Thomson Reuters Eikon

32 EQUITIES P/E, STOCKS LOOK EXPENSIVE

33 OUTLOOK In terms of prices we remain moderately optimistic and forecast average price $18.80/oz next year. Investment demand expected to show signs of recovery, although the next boom will be dependent on economic backdrop. PV demand in the solar sector is expected to continue to be the star performer of industrial offtake. Electronics will also be a positive driver. Mine supply is expected to decline in the long run and we believe that 2016 was the beginning of this protracted decline. Meanwhile, scrap will stabilise if not increase marginally on rising IP. Above ground stocks are likely to continue to grow particularly those held in custodian vaults. In the case of lack in significant demand increases, this could dampen sustainable price rises in the next years.

34 DISCLAIMER The information and opinions contained in this presentation have been obtained from sources believed to be reliable, but no representation, guarantee, condition or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. Accordingly, Reuters Ltd accepts no liability whatsoever to the people or organizations attending this presentation, or to any third party, in connection with the information contained in, or any opinion set out or inferred or implied in, this presentation. This presentation does not purport to make any recommendation or provide investment advice to the effect that any gold related transaction is appropriate for all investment objectives, financial situations or particular needs. Prior to making any investment decisions investors should seek advice from their advisers on whether any part of this presentation is appropriate to their specific circumstances. This presentation is not, and should not be construed as, an offer or solicitation to buy or sell silver or any other metal. Expressions of opinion are those of Reuters Ltd only and are subject to change without notice.

35 Thank you for your attention!