LET’S GET PHYSICAL 2018/S7 - DH.pdfSource: LBMA Edinburgh 2009 –Overview of the Silver Market by...

LET’S GET PHYSICAL -

REVOLUTION OR

EVOLUTION?

David Holmes – Heraeus Precious Metals

Image owned by Heraeus

Content is not for distribution or commercial use as content is collected, provided and/or owned by Heraeus.

See also legal disclaimer on last page. Data & image sources provided.

Unique conductive and chemical properties

• Large Bar – 31 Kg (1,000 Troy oz)

• Grains – 20 / 25 Kg bags (643 / 803 Troy oz)

LET’S GET PHYSICAL – 1 BILLION OUNCES PER YEAR

LBMA Boston | David Holmes | Heraeus Precious Metals10/30/20182

Industrials care about the “other” elements

Image owned by Argor-Heraeus



WHERE DID IT COME FROM IN 2017?


$-

$5

$10

$15

$20

$25

$30

$35

$40

-

200

400

600

800

1,000

1,200

USD/tozMln oz

Global Silver Supply

Mine production Scrap Silver Avg Px

30%

25%

20%

15%

10%

AG Source

PB/ZN Primary CU Scrap AU

1 Billion

Oz

Source: © GFMS, Thomson Reuters / The Silver Institute



WHERE DID IT GO IN 2017?


Industrial Decorative

Source: © GFMS, Thomson Reuters / The Silver Institute

Image source: Pixabay





EVOLUTION OF DEMAND SINCE THE MILLENNIUM


-

50

100

150

200

250

300

350

400

450

Other IndustrialFabrication

Photo PV Auto Smartphones Jewelry, Coins, Medalsand Silverware

Mln oz

Shift in Industrial Silver Demand(Sources: 2018 WSS, OICA, eMarketer ,and Heraeus)

1999

2017



DID THE LBMA FORECAST THIS DEMAND EVOLUTION?


Source: LBMA Edinburgh 2009 – Overview of the Silver Market by Jessica Cross:

Excellent forecast – 2017 Solar forecast of 100 mln / actual 95 mln



WHAT WILL BE THE GROWTH INDUSTRIES FOR THE NEXT 10 YEARS?


0

20

50

94

45

80

200

70

200

0

50

100

150

200

250

Solar Automotive Electronics

Mln oz 1997 2017 2030

?

Source: Silver Institute World Survey 2018 / Coeur Mining



SOLAR – COMPETITIVE WITH OTHER SOURCES OF POWER


• In the decade to 2016, the amount of solar power

generated across the world rose 50% to account for 2% of

world generation – expected to rise to 7% by 2030

• China and India have seen explosive growth in solar over

the past years and are now the biggest and third biggest

renewable electricity markets, respectively

• Main drivers of growth have been a collapse in the cost of

solar panels and improving technology

• Growth at risk due to global policy changes threaten the

current momentum – tariffs / subsidies

• CRU expect silver loadings in solar PV to decline from

today’s 95 Mln oz to 65 Mln oz in 2030 despite increasing

installation due to thrifting.



AUTO – EXPLOSIVE GROWTH TO COME


• Global Vehicle Production has grown steadily, driven

mostly by China

• The composition of vehicle propulsion has and will

continue to change

• Vehicle ownership per capita has increased in EM and is

expected to grow with GDP per Capita

• Silver Demand in Automotive is predicted to increase

significantly

• Silver loading in ICE is lower than HEV and EV

• Silver holding components in new vehicles is on the rise

0

20

40

60

80

100

120

140

160

Mln

oz

Silver Demand In Automotive (Source: 2018 WSS)

ICE HEV EV

0

10

20

30

40

50

60

70

80

90

100

Mln

Ve

hic

les

Global Vehicle production (Source: OICA)

Other China



SMARTPHONES – OVERLOOKED BUT NOTEWORTHY


• Global smartphone production is expected to reach 1.5bn in 2018

• Developed markets are saturated, but there is ample potential from

emerging economies

• India is now the second largest smartphone market in the world

and is expected to grow by 15.6% in 2018

• The Average Ag loading in a smartphone is 0.35g (US EPA), and

smartphones have become a noteworthy source of demand

• Apple expected Ag recovery per iPhone is 0.075g (Apple

Environmental Responsibility Report 2018)

• Spent Smartphones are a source of precious metal

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

0

100

200

300

400

500

600

2017 2018 2019 2020 2021 2022

% of populationMln usersSmartphone Users In India

(Source: eMarketer)

Smartphone Users in India % of population

0

5

10

15

20

0

200

400

600

800

1000

1200

1400

1600

2013 2014 2015 2016 2017

Mln tozMln units

Global Smartphone Shipments(Source: Trendforce)

Global Smartphone Shipment (mm) Silver Demand (mm toz)



FUNDAMENTALS UNDERPIN THE MARKET…… WHAT ABOUT INVESTORS?


Investment flows tend to

swamp fundamental activity

Credit: Pixabay



Rise and fall of physical investment.

RISE AND FALL OF PHYSICAL INVESTMENT


$10

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$22

$24

$26

$28

$30

$32

0

2

4

6

8

10

12

14

16

USD/OzMn oz

Total Monthly Volume of American Eagle Sold (Mln oz)

Ounces Sold Ag Average Price

Source: US Mint



Total ETF holdings stable in contrast to increasing Comex Stocks

PHYSICAL INVESTMENT AND COMEX STOCKS


0

100

200

300

400

500

600

$- $5 $10 $15 $20 $25 $30 $35 $40 $45 $50

SILVER ETF HOLDINGS

Silver ETF Holdings (Million TOZ) XAGUSD Curncy - Last Price (L1)

Stable ETF Holdings

Increasing Warehouse

Stocks

Source: Bloomberg



SILVER SPECULATIVE DASHBOARD


$10

$12

$14

$16

$18

$20

$22

$24

THE MOVING AVERAGE

Last Price SMAVG (50) SMAVG (200)

$10

$12

$14

$16

$18

$20

$22

$24

-40,000

-20,000

0

20,000

40,000

60,000

80,000

CFTC NET SPECULATIVE POSITION

CFTC Speculative Net Position Avg. Ag Px

Source: Bloomberg

$-

$20

$40

$60

$80

$100

$120

Gold Silver Ratio

• Gold / Silver Ratio - stretched

• Technical Levels – price trending lower

• Net Speculative Position - short



WHAT FACTORS INFLUENCE INVESTOR DEMAND FOR SILVER?


USD

Tariffs

Geo

Politics

China

Equities

Global

Growth

Crypto

Currencies

Inflation

Monetary

Policy

Gold



$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

US

D/o

z

Silver Price

• Speculative investor activity is the primary driver of silver price action

• It’s not a Revolution but it is an Evolution …. we can look forward to robust physical demand with strong growth in

electronic applications leading to a positive price bias.

RELATIVE IMPACT OF PHYSICAL AND SPECULATIVE FACTORS ON THE PRICE


Speculative Investors In Speculative Investors Out



BOSTON TEA PARTY - YES OR NO?


Let’s discuss this over a cup of tea – Cheers!




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This document is being supplied to the recipient only, on the basis that the recipient is reasonably believed to be a professional market participant in the

precious metals market. It is directed exclusively at entrepreneurs and especially not intended for the use of consumers.

The material contained in this document has no regard to the specific investment objectives, financial situation or particular need of any specific recipient or

organization. It is not provided as part of a contractual relationship. It is not and should not be construed as an offer to sell or the solicitation of an offer to

purchase or subscribe for any investment or as advice on the merits of making any investment.

This presentation has been compiled using information obtained from sources that Heraeus believe to be reliable but which they have not independently

verified. Further, the analysis and opinions set out in this document, including any forward-looking statements, constitute a judgment as of the date of the

document and are subject to change without notice.

There is no assurance that any forward-looking statements will materialize. Therefore, Heraeus does not warrant the accuracy and completeness of the data

and analysis contained in this document.

Heraeus assumes no liability for any losses or damages of whatsoever kind, resulting from whatever cause, through the use of or reliance on any

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LET’S GET PHYSICAL 2018/S7 - DH.pdfSource: LBMA Edinburgh 2009 –Overview of the Silver Market by...

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