TORONTO (miningweekly.com) – The global demand for silver bullion has risen to a record high in 2013, boosted by significant growth in silver fabrication, silver coin and strong jewellery demand, the latest instalment of the ‘World Silver Survey’ has found.

Published on Wednesday, the report found that in 2013 total physical silver demand rose by 13% to just over one-billion ounces, an all-time high that was mainly driven by a 76% increase in retail investment in bars and coins, coupled with a sturdy recovery in jewellery and silverware fabrication.

Prepared by research firm Thomson Reuters GFMS for The Silver Institute, the report found that the largest component of physical silver demand, industrial applications, dipped by less than 1% to 586.6-million ounces, to account for 54% of total physical silver demand.

Asia, however, experienced a 3% increase in silver industrial demand, led by China, where a continued recovery in the electrical and electronics sector, along with gains in the Chinese ethylene oxide industry, took total Asian industrial offtake to a new high. Japan also experienced gains in silver industrial demand.

Last year’s recovery in jewellery fabrication was a reflection of the improved economic outlook in the industrialised world, which lifted consumer confidence and retail sales for a 10% increase in jewellery demand at 198.8-million ounces. Global silverware fabrication rose 12% to a three-year high of 50-million ounces, on the back of strong gains in India and China.

Photography demand slipped by 7% to 50.4-million ounces in 2013, posting the slowest percentage decline in nine years.

The global supply of the grey metal declined by 2.7% in 2013, to 978.1-million ounces, impacted mainly by a 24%, or 60.8-million-ounce, slide in silver scrap.

Scrap supply to the market in 2013 experienced the largest year-on-year reduction since the 1980s, which was owing to a combination of softer silver prices and an exhaustion of “distressed” coin and jewellery recycling. As a proportion of total silver supply, scrap dropped to under 20%, after averaging 25% in total supply the previous two years, and this served as a substantial contributor to the physical market deficit posted in 2013.

The net balance had grown by 47-million ounces to 113.3-million ounces.

The silver price averaged $23.79/oz last year, the third-highest nominal average price on record, but still down 24% year-over-year in a particularly volatile time for the entire precious metals complex, the report has found.

Silver mine production grew by 3.4% to reach 819-million ounces. A large portion of the growth was attributable to the primary silver mining sector, which experienced strong growth from the start, along with the ramp-up of operations that entered production in recent years.

Primary silver mine output grew 6%, and accounted for 29% of global silver mine supply. Mexico was the world’s leading silver producer, followed by Peru, China, Australia and Russia.

Primary silver mine cash costs stood at $9.27/oz, up 1% in dollar terms. The producer silver hedge book was aggressively reduced last year to stand at 15-million ounces on a delta-adjusted basis.

Supply from above-ground stocks dropped by 23.2% to 199.7-million ounces.

Government sales increased slightly to 7.9-million ounces, an extremely low level considering government disposals averaged 43-million ounces a year from 2002 to 2011.

The report found that the total identifiable investment demand, which includes physical bar investment, coins and exchange-traded fund (ETF) inventories, rose by 27% to a three-year high at 247.2-million ounces last year. The growth was driven mainly by a strong rise in retail purchases of silver bars and coins.

Demand for physical bullion bars more than doubled last year to reach a high of 127.2-million ounces, while purchases of silver coins and medals rose 38% to a record 118.5-million ounces. ETF holdings showed only modest growth in 2013, adding 1.6-million ounces, compared with adding 157.8-million ounces in 2006.