In 2022, global silver demand reached a record level of 1.24 billion troy ounces. This was driven by increased demand from various sectors, namely: industry (5%), physical silver investments (22%), jewelry (29%), and silverware (80%). It marks the second consecutive year of a deficit in the silver market, with last year’s deficit amounting to 237.7 million troy ounces.
 
The figures come from The Silver Institute, an organization that releases annual data on the global silver market. These figures provide insight into total silver demand from various perspectives. For example, last year the demand for silver in solar panels rose by 27.5%, from 110 million troy ounces in 2021 to 140.3 million troy ounces in 2022. Additionally, demand for silver in the form of jewelry also increased. Jewelers in Europe sold more silver jewelry last year than in the previous year.
 

Increasing Demand as Supply Stagnates

When examining The Silver Institute's data, we see that demand for investment silver rose from 274 million troy ounces in 2021 to 332.9 million troy ounces in 2022. Due to increasing geopolitical uncertainties and soaring inflation, investors worldwide bought more silver bars and coins last year.
 
In the United States, this sometimes led to higher premiums and a limited supply, which dampened demand. The demand for silver coins did not increase in Europe, which The Silver Institute attributed to a sudden VAT increase on investment coins in Germany.
 
However, the production from silver mines and the secondary supply of silver through recycling remained virtually unchanged in 2022 compared to the previous year. Supply did not keep up with demand, resulting in a silver deficit in 2021 and 2022.
 

World Silver Supply & Demand 2021 & 2022 (Source: The Silver Institute)
 

Impact on Silver Price

Demand for silver exceeded new supply. This does not mean that silver is running out or becoming scarcer. A deficit in 2022 means that silver was pulled from above-ground inventories to meet demand. This had a price-inflating effect, as reflected in the rise in the price of silver in 2022.
 
However, there is no fundamental shortage of silver, as a significant portion of the above-ground inventory is now held by investors. Whether these stocks return to the market depends on investor behavior as the silver price rises. Profit-taking could put pressure on the price, but if investors, on balance, buy more silver, the price will continue to rise.
 
According to The Silver Institute, the outlook for 2023 is favorable, with a predicted increase in demand for silver in industry, jewelry, and physical investments. Meanwhile, production from silver mines will show only a slight increase. The deficit for 2023 is estimated at 142.1 million troy ounces, making it the second-largest deficit in more than twenty years.
 
Disclaimer: The Silver Mountain does not provide investment advice, and this article should not be considered as such. Past performance does not guarantee future results.