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After holding in a sideways pattern for much of 1999, silver prices staged a strong rally in the second half of September, 1999. Prices increased nearly a dollar an ounce before moving back down to levels seen earlier in the year. The reason for the rally appeared to be developments in the gold market which saw an agreement to limit sales of gold stocks by central banks. After having been under strong selling pressure, gold prices reacted to the news by staging a strong rally though much of the gains were later given back. The rally in silver appeared to be more in sympathy with other precious metals, which moved higher, than with any change in the underlying fundamentals in the silver market. The U.S. Geological Survey reported that U.S. mine production of recoverable silver in 1998 was 2,060 metric tonnes. This was down 4 percent from the 1997 output of 2,150 tonnes. U.S. mine production of silver has increased. In 1994 production was 1,490 tonnes. In 1998, silver was produced at 76 mines in sixteen states. The largest producer was Nevada followed by Alaska, Arizona and Idaho. Precious metal ores accounted for about one-half of domestic silver production while the other half saw silver recovered as a by-product from the processing of copper, lead and zinc ores. About 1,700 tonnes were recovered from old and new scrap. There were 22 principal refiners of commercial-grade silver with an estimated output of 3,600 tonnes. About 30 fabricators accounted for more than 90 percent of the silver used in arts and industry. Silver is used primarily for industrial purposes in photographic materials, electrical products, catalysts, brazing alloys, dental products and bearings. Other aesthetic uses for silver are in jewelry, tableware and coins. U.S. apparent consumption of silver in 1998 was 5,240 tonnes, up 5 percent from the year before. At the end of 1998, stocks of silver at the Treasury Department were 400 tonnes, down 17 percent from the year before. The Government continues to dispose of silver held in the National Defense Stockpile. Most of it has been used in the production of commemorative coins. In the sixteen year period between 1982 and the end of September 1999, the Government reduced the amount of silver in the stockpile from 4,300 tonnes to about 1,100 tonnes. World mine production of silver in 1998 was estimated at 16,200 tonnes, down 1 percent from 1997. The U.S. is a major producer of silver. Mexico’s 1998 mine production was estimated at 2,700 tonnes, about the same as in 1997. Production by Peru in 1998 was estimated at 1,900 tonnes, down 9 percent from the year before. Other major producers include Canada and Australia. World reserves are estimated at 33,000 tonnes. About two-thirds of the world’s silver resources are in copper, lead and zinc deposits. Remaining resources are in vein deposits where silver is the most valuable component. U.S. mine production of silver in June 1999 was 170,000 kilograms, up 7 percent from May 1999 but 8 percent less than a year earlier. In the January-June 1999 period, mine production of silver was 983,000 kilograms, up 14 percent from the previous month. In the first six months of 1999, Nevada silver production was 298,000 kilograms, while for all of 1998 it was 670,000 kilograms. Idaho production of silver in June 1999 was 33,400 kilograms, the same as the previous month. For the first half of 1999, production was 201,000 kilograms, while for all of 1998 it was 447,000 kilograms. Arizona silver production in June 1999 was 16,800 kilograms, the same as the previous month. For the first half of 1999, Arizona production was 97,700 kilograms, and for all of 1998 it was 211,000 kilograms. U.S. imports of silver bullion in May 1999 were 206,000 kilograms. In the January-May 1999 period imports were 1.19 million kilograms while for all of 1998 they were 2.8 million kilograms. The major suppliers were Canada, Mexico and Peru. Imports of silver metal powder in May 1999 were 16,100 kilograms. In the January-May 1999 period metal powder imports were 53,000 kilograms, while for all of 1998 they were 129,000 kilograms. Silver waste and scrap (gross weight) imports in May 1999 were 352,000 kilograms. In the January-May 1999 period imports totaled 861,000 kilograms, while for all of 1998 they were 1.8 million kilograms. The major suppliers were the Netherlands, Canada and Germany.

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Futures Markets

Silver futures are traded on the Tokyo Commodity Exchange (TOCOM), the Chicago Board of Trade (CBOT), the Mid America Commodity Exchange (MidAm) and the New York Mercantile Exchange, COMEX division (COMEX). Options are traded on the European Options Exchange (EOE-Optiebeurs), the CBOT and the COMEX.

Excerpted from the CRB Commodity Yearbook.