China’s stockpiles are expanding after the nation almost tripled mine production since 2000, to about 4,212 tons in 2012, according to CPM Group Inc., a New York-based research company. The country imported 28 percent less metal in February, the fifth decline in six months, customs data show. China’s economy will grow 8.1 percent this year, the second-slowest pace in the past decade, economist estimates compiled by Bloomberg show.
Industrial demand for the metal will gain 1.7 percent to a three-year high of 14,625 tons in 2013, and rise another 2.8 percent in 2014, according to Barclays. A car contains as much as 30 grams and a mobile phone as much as 0.25 gram, the Washington-based Silver Institute estimates.
Silver is mostly produced as a byproduct of gold, copper, lead and zinc mining, according to the U.S. Geological Survey. Mine output will climb 1.2 percent to a record 25,240 tons this year, London-based Barclays predicts.
Shares of Mexico City-based Fresnillo Plc, the largest primary silver producer, slid 37 percent in London this year. Coeur d’Alene Mines Corp., which gets about 61 percent of its revenue from silver, fell 37 percent in New York trading.
Investors may be dissuaded by the metal’s price swings, with the 100-day historical volatility about 60 percent more than for gold. Silver’s 52 percent slump from the record $49.8044 reached in April 2011 compares with gold’s 28 percent drop from its peak that year. The bear market entered this month was the 11th since April 2004, data compiled by Bloomberg show.
“The big overriding force is the risk premium and it has come out of both gold and silver as U.S. is showing some signs of growth,” said James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees $325 billion of assets. “Industrial demand for silver is buoyant but whether that will be able to offset the drop in prices because of waning safe-haven value is the big question.”