A few weeks ago Jeffrey Christian, CPM Group, stated that silver investment
demand was not part of the calculations used in his analysis to determine
future forecast for silver pricing or silver demand. According to Christian
if you include investment demand then your analysis is simply promoting the
idea that there is a deficit in whatever commodity your analyzing. We’re not
sure the evidence supports this concept.
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Jeffrey Christian recently stated
Silver investment demand will rise to 128 million next year from 108
million ounces in 2017, Christian said.
Fabrication demand for silver, largely led by an uptick in solar panels,
will drop because there is likely inventory sitting from purchases over the
last few years.
“As a result, you’ll see less silver being sold in 2018 than in 2017, but
it’s still an uptrend long-term because solar panels are still gaining in
popularity,” Christian said. Source
We have documented time and again how China, India and Morocco are all
building millions and millions of solar panels to install on more than
300,000,000 homes in China alone. My guess is there is not a single solar
panel sitting idly by in some warehouse waiting to fill an order. India has
vowed to meet China’s challenge and has stated they, too, will power
300,000,000 homes with solar energy, while Morocco has is going to power a
much more modest 1.1 million homes.
At the time of the interview – listen here – Jeff explained China was not only using
every ounce of silver they mined but had begun importing millions of ounces
of dore’ silver bars as well as silver concentrates!! Silver concentrates are
basically silver ore that comes right out of the ground!! That’s a lot of
silver and an enormous amount of silver production. Just this morning we
learn how this impacting silver and the solar industry on a global scale.
When you are the size of China, every thing you do impacts someone or
something else.
China alone installed 7.1
gigawatts of new PV capacity in the first quarter of 2016 according
to the country’s National Energy Association. Matching 40% of last year’s record solar installations in China, and
with energy capacity equivalent to 8 of the country’s 30 nuclear power stations currently in operation, that
equals 12% of 2015’s record PV addition around the globe.
At this pace, the world’s second-largest economy would account for half of
2016’s total projected solar-panel installations. [Source]
By eliminating “investment demand” from silver analysis one has to shift
that demand for bullion to fabrication. Simply stating that investment demand
for precious metals is not part of your analysis doesn’t change the fact that
investment demand is real and has an impact on the overall supply of the
product. How does that silver get accounted for if it is not counted as
investment demand?
With a complete lack of accounting for the 18 million ounces of American
Silver Eagles, not to mention the almost 10 million ounces the Perth Mint has
sold along with the more than 12 million ounces of Silver Maples sold by the
Royal Canadian Mint year-to-date in 2017 that equals approximately 40 mm
ounces. Using a very conservative 40 million ounces of silver bullion just
for 3 of the government minted coins we can see there is a significant amount
of silver that Jeffrey Christian is not including in his analysis. Will it
move the needle for silver demand? Yes, it would not be much of a move but if
someone completely ignores an entire segment of demand for any product how
can their analysis have any meaning? Oh, that’s right, his analysis doesn’t
matter as the company he works for sets the price of silver so the
demand/supply fundamentals are completely mute.
This talk of investment demand doesn’t take into account what happened
with investment demand for the worlds two largest mints, the US Mint and
Royal Canadian Mint, from July 2015 to March 2016 (USMint) April 2016 (Royal
Canadian Mint).
This brings me to the next step in this situation – China is already
importing silver ore and refining in China to supplement their
silver mining operations. India has no mining operations to speak of, and
Africa produces very little silver. Which all leads to the next point: global
demand for investment silver bullion. Global demand has increased to the
point the two largest government mints in the world have moved to rationing
sales beginning in July 2015 and continuing through the first quarter of
2016. Source
We just find it interesting that Jeffrey Christian uses the one item
within the silver world that is in absolute demand around the globe and say
that demand must be in decline and therefore supply/demand fundamentals will
be out of balance in 2018. Until China, India and Morocco complete their
massive solar programs, sometime in 2020 or beyond, the solar panel demand,
and by default silver demand for fabrication, is going to be steady or
increasing. If there is a decrease in silver demand in 2018 it will be
directly tied to investment demand, not solar panel demand.
