Silver had witnessed weak aggregate demand last year amid the COVID-19 pandemic, which crippled the industrial sector which accounts for about 60% of global silver consumption. Demand from jewelers has also been reduced. The demand for investment was the only saving grace, with the metal winning its demand for safe haven. However, with the resumption of activities and the economic recovery underway this year, the demand for silver has recovered in industry, photography, jewelry and silverware. Investment targets also contributed to the momentum. The Silver Institute predicts that the global demand for silver will grow 15% year-over-year to 1.029 billion ounces in 2021 – crossing the billion ounce threshold for the first time since 2015. It s He also expects a deficit in the silver market this year – the first time since 2015.
This scenario bodes well for silver prices and therefore for Zacks. Mining – Silver industry. We suggest you keep an eye out for some companies like First Majestic Silver Corp. AG, Hecla mining company HL and MAG Silver MAG, who are poised to take advantage of these trends and their efforts to increase efficiency and cost management.
US and India to fuel growth in investment demand
According to the Silver Institute, investment demand is expected to reach a six-year high of 263 million ounces (Moz) this year, supported by growth in the United States and India. This indicates year-over-year growth of 32%, the highest overall. Demand for coins and bullion is expected to exceed 100 million ounces in the United States for the first time since 2015. Improving sentiment towards the price of silver and an economic recovery are expected to fuel demand in India. Total holdings of exchange traded products are expected to increase by 150 Moz.
Industrial demand reaches new heights
The unmatched characteristics of silver make it an indispensable component for many industrial products. With the continued expansion of manufacturing activity, the industrial demand for silver will be around 525 Moz. This suggests 8% growth from 2020 levels.
Demand for silver jewelry is expected to increase 18% year over year to 173 Moz, while the same for silverware manufacturing will increase 25% to 40 Moz. This will be facilitated by the recovery in all key countries, especially India with the wedding and party season underway.
The money market is heading into deficit
Last year, global silver mining production fell 7% to 780 million ounces – the largest drop in the past decade and also the fourth consecutive annual decline. This was mainly due to temporary mine closures in several major silver-producing countries in the first half of 2020 due to the pandemic. However, with most mines currently operating at full capacity, mined silver production is expected to improve 6% to 829 Moz this year. With this projection, the silver market is heading towards a deficit of 7 Moz, the first since 2015.
Meanwhile, industry average margins are currently at their highest level since 2012. This is due to the high prices of silver and metal by-products this year, which have improved the industry’s profitability despite rising input costs. Last year, average silver prices gained 27% and according to Metals Focus, they are expected to increase 24% year-on-year to reach $ 25.40 in 2021. This will be the highest annual average since 31. $ 15 in 2012.
The path to follow
The ongoing revolution in green technologies, aided by the exponential growth of new energy vehicles and investments in solar photovoltaic energy, will act as a major catalyst for money in the days to come. Jewelry manufacturing, which accounts for about one-fifth of total silver demand, is expected to be a key growth driver. India is likely to become a big consumer thanks to increasing investor interest and growth in the manufacture of jewelry, home decor and silverware. Silver serves as a safe haven in times of uncertainty. Meanwhile, the lack of development of new projects, the drop in ore grades and the depletion of reserves remain headwinds. While demand remains strong, the shortage of supply will drive silver prices in the days to come.
In one year, the Mining – Silver industry fell by 1.8%, against a growth of 30.3% for the S&P 500. The industry fits into the larger framework Basic materials sector, which gained 10.6% over the same period. Amid the uncertainty of the pandemic, the mining industry has resorted to targeted technological innovations at nearly all levels of operations to increase efficiency, support growth and keep costs low.
Image source: Zacks Investment Research
3 silver stocks to watch out for
Image source: Zacks Investment Research
First majestic: The acquisition of the Jerritt Canyon gold mine earlier this year enhanced its geographic operating platform while adding a production asset in a world-class jurisdiction, with Nevada considered one of the jurisdictions most attractive for mining operations. The company hit a new record 7.3 million ounces of silver equivalent in the third quarter of 2021, reflecting a 14% increase from the previous quarter due to a full quarter of production from the operation of Jerritt Canyon and a continued strong performance in San Dimas and La Encantada. On the strength of this performance, the company’s stock has appreciated by 27% in one year. The company expects higher grades to boost production growth at San Dimas, Jerritt Canyon and Santa Elena in the fourth quarter and through 2022. The company has also made investments that will help reduce costs. from the fourth quarter, thanks to higher production, lower capital costs and continuous improvements in operational efficiency.
Zacks’ consensus estimate for FY2021 earnings for First Majestic suggests year-over-year growth of 5.6%, while the same for 2022 indicates an improvement of 160%. He currently wears a Zacks Rank # 3 (Hold). You can see The full list of today’s Zacks # 1 Rank (Strong Buy) stocks here.
Hecla mining: On the strength of its strong operational performance, the company increased its silver dividend for the second time this year and returned approximately 20% of its free cash flow to its shareholders. At the same time, the company executed the largest exploration program in its history. Hecla Mining has a diversified portfolio of assets in jurisdictions favorable to mining. Its mines have the highest reserve grades, long life and are low risk. The company is one of the cheapest US silver producers and produces about 43% of the silver mined in the country. This is expected to increase as the Lucky Friday mine in Idaho ramps up. Testing of a new method of drilling and blasting at Lucky Friday shows good performance in controlling seismicity and improving safety with the potential to increase productivity. The stock jumped 20% last year.
Zacks’ consensus estimate for Hecla Mining’s earnings for fiscal 2021 suggests 175% year-over-year growth. The estimate for 2022 shows year-over-year growth of 123%. The company has an estimated long-term earnings growth rate of 1%. Zacks’ # 3 ranked stock has a surprise four-quarter earnings surprise of 13%, on average.
MAG Silver: The company is engaged in the exploration and development of silver mining properties. He explores deposits of gold, lead and zinc. It primarily owns a 44% stake in the high-grade Juanicipio project located in the Fresnillo District, Zacatecas State, Mexico. The company is currently constructing and developing surface and underground infrastructure on the property to support a 4,000 tonne per day mining operation, with operational expertise from its joint venture partner. The Juanicipio project is a robust, high grade, high margin underground silver project with low development risks. The Juanicipio plant should be commissioned by the end of the year, subject to timely connection to the electricity grid. The company’s shares have gained 16% in the past year.
Zacks’ consensus estimate for MAG Silver earnings for fiscal 2021 is currently set at a loss of 1 cent per share, indicating an improvement over the 8 cent loss in 2020. The consensus mark for The company’s profit for 2022 is set at $ 1.22, suggesting a substantial improvement over fiscal 2022. The company has a surprise four-quarter profit of 29%, on average. He currently wears a Zacks Rank # 3.
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