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56 E&MJ; • JANUARY 2017 www.e-mj.com MARKETS At the Annual Silver Industry Dinner host- ed by the Silver Institute in mid-Novem- ber, Johann Wiebe, senior analyst in the GFMS team at Thomson Reuters, present- ed the GFMS/Silver Institute Interim Silver Market Review, which included provision- al supply and demand forecasts for 2016. The silver market was expected to be in an annual physical defi cit of 52.2 million oz in 2016, Wiebe explained, marking the fourth consecutive year in which the mar- ket had realized an annual physical short- fall. "While such defi cits do not necessarily infl uence prices in the near term, multiple years of annual defi cits can begin to apply upward pressure to prices in subsequent periods," Wiebe said. In 2016, an expected 71.4-million-ounce (oz) net infl ow into ETF holdings and a 61.9-million-oz derivatives exchange inventory build on a year-to-date basis (end-October) have increased the impact of the physical defi cit, bringing the net balance to -185.5 million oz, equiva- lent to approximately nine weeks of global demand. Above ground stocks, including ETF's and exchange inventories, were esti- mated to reach 2.64 billion oz in 2016, a 15% increase from the previous year. In mid-November, the GFMS team at Thomson Reuters predicted silver prices to average $17.15/oz for the full calendar year, a 9.4% increase over the 2015 av- erage. During December, however, prices dropped more than $1/oz from a little more than $17/oz to a little less than $16/oz. Total silver supply was forecast to fall 3% to 1.012 billion oz in 2016. The de- cline was expected to be driven by a 1% drop in mine production, a 0.3% fall in scrap supply and net de-hedging of 20 million oz. Mine production was forecast to reach 887.4 million oz, which was al- most 6 million oz lower than 2015 and the second highest year of production on record. Healthy increases in primary sil- ver mine production, particularly in Peru, were being partially offset by losses in sil- ver output from lead/zinc and gold mines. Silver bullion coin and bar sales were expected to contract 24% to 222 million oz in 2016. Bullion silver coins were fore- cast to reach 122.7 million oz in 2016, which was 7.9% below 2015's record of 133.2 million oz. "The drop is unsurpris- ing given the strong increase recorded in the prior year, when investors entered the market en masse to bargain hunt follow- ing the silver price decline during the sec- ond half of 2015," Wiebe said. Physical bar demand was expected to contract by 38% in 2016 to 99.3 million oz. Silver demand from the photovoltaics industry was forecast to increase by 11% to reach a record high of 83.3 million oz in 2016. The rise was driven by global solar installations, which should have reached 70 GW in 2016. China accounts for 70% of those additions in solar in- stallations. Solar made up 14% of total industrial demand, which was up signifi - cantly from 1% a decade ago. Jewelry fabrication is forecast to drop 8% to 208.5 million oz in 2016. Despite the Soft Market, Silver Remains in Defi cit Gold and silver prices provided by KITCO Bullion dealers (www.kitco.com). Platinum group metals prices provided by Johnson Matthey (www.platinum.matthey.com). Non-ferrous base and minor metal prices provided by London Metal Exchange (www.lme.co.uk). Iron ore prices provided by Platts Iron Ore Index. Currency exchange rates were provided by www.xe.com. (December 30, 2016) Precious Metals ($/oz) Base Metals ($/mt) Minor Metals ($/mt) Exchange Rates (U.S.$ Equivalent) Gold $1,150.90 Aluminum $1,713.50 Molybdenum $15,250 Euro (€) 1.048 Silver $15.88 Copper $5,501.00 Cobalt $32,900 U.K. (£) 1.230 Platinum $903.00 Lead $1,985.00 Canada ($) 0.723 Palladium $682.00 Nickel $10,010.00 Iron Ore ($/dmt) Australia ($) 0.746 Rhodium $770.00 Tin $21,100.00 Fe CFR China $75.30 South Africa (Rand) 0.073 Ruthenium $40.00 Zinc $2,563.00 China (¥) 0.144 World Silver Supply & Demand (million oz) 2013 2014 2015 2016(f) Supply Mine Production 824 0, 868 0, 893 0, 887 Other 165 0, 185 0, 153 0, 125 Total Supply 989 1,053 1,046 1,012 Demand Jewelry & Silverware 0, 277 0, 285 0, 289 0, 258 Coins & Bars 0, 242 0, 237 0, 292 0, 222 Industrial Fabrication 0, 619 0, 611 0, 589 0, 585 ETF & Exchange Invetory Build 0,0 11 0,0- -4 0,0- -5 0, 133 Total Demand 1,149 1,129 1,165 1,198 Surplus/Defi cit 0 -160 00 -76 0 -119 0 -186 Average Silver Price ($/oz) 23.79 19.08 15.51 17.00 Source: GFMS, Thomson Reuters/The Silver Insitute