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Silver is prized primarily for its dual role as a monetary asset as well as an important industrial metal used in a widerange of applications. Industrial demand for silver, the largest component of total silver off- take, is set to increase its share of total demand in 2016, according to the Silver Institute. In 2015, industrial fabrication demand accounted for an estimated 54% of total physical silver demand. Silver's use in photovoltaics for solar energy is projected to rise in 2016 and sur- pass the previous peak of 75.8 million oz set in 2011, as global solar panel installa- tions are expected to grow at a high single- digit pace. Moreover, silver's use in this application may account for more than 13% of total silver industrial demand in 2016, up from 1.4% a decade ago. Silver demand from ethylene oxide (EO) producers is expected to jump to more than 10 million oz this year, a more than 25% increase over 2015. EO is critical in the pro- duction of plastics, solvents and detergents. This growth comes off a very robust 2015, when demand grew by more than 40%. The bulk of demand is expected to continue to come from new EO plants and expansions at existing ones located in China. China is expect- ed to account for an estimated 80% of silver requirements for new EO capacity in 2016. Jewelry fabrication is expected to increase by 5% in 2016, in contrast to a modest contraction last year. While the mar- ket will likely see a decline in Chinese silver jewelry demand, which accounted for around 16% of the 2015 total for silver jewelry fab- rication, growth in other countries should more than offset China's slip in demand. Coin demand is expected to be robust once again in 2016, following a record 130 million oz of demand last year. Demand will remain elevated this year as investors take advantage of relatively lower metal prices. In 2015, coin demand made up an estimated 12% of total physical demand. Silver exchange-traded funds (ETF) holdings fell by 2.8% by the end of 2015 compared to year-end 2014. Notably, the decline in silver ETF holdings was smaller against gold's 8% contraction. Silver ETF holdings should continue to remain in stick- ier hands than those of gold's investors, partly a reflection that silver ETF holdings have a larger proportion of retail investors. Indian silver demand in 2016 is expect- ed to grow on the back of increased investor interest and growth in jewelry, decorative items and silverware fabrication. India, long a mainstay of global silver demand, import- ed a record high 228 million oz of silver bul- lion in 2015. Imports rose largely due to a decrease in scrap flows. Global mine supply production is pro- jected to fall in 2016 by as much as 5% year-on-year. This would represent the first reduction to global silver mine production since 2002. The lower price environment provided little incentive for producers to invest in expanding capacity at existing operations. Looking further ahead, many analysts expect global silver mine produc- tion to fall through 2019 as primary silver production from more mature operations begins to drop. M A R K E T S 80 E&MJ; • MARCH 2016 www.e-mj.com (February 29, 2016) P r e c i o u s M e ta l s ( $ / o z ) B a s e M e ta l s ( $ / m t) M i n o r M e ta l s ( $ / m t) E x c h a n g e R a te s ( U . S . $ E q u i v a l e n t ) Gold $1,238.00 Aluminum $1,621.50 Molybdenum $12,200 Euro (€) 1.119 Silver $14.89 Copper $4,705.00 Cobalt $22,850 U.K. (£) 1.516 Platinum $922.00 Lead $1,777.50 Canada ($) 0.822 Palladium $492.00 Nickel $8,420.00 Ir o n O r e ( $ / d m t ) Australia ($) 0.783 Rhodium $680.00 Tin $16,295.00 Fe CFR China $49.30 South Africa (Rand) 0.083 Ruthenium $42.00 Zinc $1,785.00 China (¥) 0.162 Gold and silver prices provided by KITCO Bullion dealers (http://www.kitco.com). Platinum group metals prices provided by Johnson Matthey (http://www.platinum.matthey.com). Non-ferrous base and minor metal prices provided by London Metal Exchange (http://www.lme.co.uk). Iron ore prices provided by Platts Iron Ore Index. Currency exchange rates were provided by GoCurrency.com. Demand Remains Healthy as Growth in Mined Silver Slows World Silver Supply & Demand (million oz) Supply 2012 2013 2014 2015(f) Mine Production 0, 787.50 -0, 832.00 -0, 865.00 -0, 867.20 Other 0, 215.80 -0, 164.50 -0, 184.10 -0, 147.20 Total Supply 1,003.30 -0, 996.50 - 1,049.10 - 1,014.40 Demand Jewelry & Silverware 0, 229.20 -0, 276.80 -0, 285.20 -0, 280.00 Coins & Bars 0, 141.70 -0, 226.40 -0, 203.50 -0, 206.50 Industrial Fabrication 0, 596.90 -0, 601.70 -0, 595.20 -0, 570.70 Physical Demand 0, 967.80 - 1,104.80 - 1,083.90 - 1,057.10 Surplus/Deficit 0,0 35.50 0, -108.30 0,0 -34.80 0,0 -42.70 Average Silver Price ($/oz) 0,0 31.15 -0,0 23.79 0,0- 19.08 0,0- 15.51 Source: GFMS, Thomson Reuters/The Silver Institute