let’s get physical 2018/s7 - dh.pdfsource: lbma edinburgh 2009 –overview of the silver market by...
TRANSCRIPT
LET’S GET PHYSICAL -
REVOLUTION OR
EVOLUTION?
David Holmes – Heraeus Precious Metals
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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
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WHERE DID IT COME FROM IN 2017?
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/20183
$-
$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
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WHERE DID IT GO IN 2017?
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/20184
Industrial Decorative
Source: © GFMS, Thomson Reuters / The Silver Institute
Image source: Pixabay
Image source: Pixabay
Image source: Pixabay
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EVOLUTION OF DEMAND SINCE THE MILLENNIUM
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/20185
-
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
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DID THE LBMA FORECAST THIS DEMAND EVOLUTION?
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/20186
Source: LBMA Edinburgh 2009 – Overview of the Silver Market by Jessica Cross:
Excellent forecast – 2017 Solar forecast of 100 mln / actual 95 mln
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WHAT WILL BE THE GROWTH INDUSTRIES FOR THE NEXT 10 YEARS?
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/20187
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
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SOLAR – COMPETITIVE WITH OTHER SOURCES OF POWER
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/20188
• 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.
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AUTO – EXPLOSIVE GROWTH TO COME
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/20189
• 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
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SMARTPHONES – OVERLOOKED BUT NOTEWORTHY
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/201810
• 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)
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FUNDAMENTALS UNDERPIN THE MARKET…… WHAT ABOUT INVESTORS?
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/201811
Investment flows tend to
swamp fundamental activity
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Rise and fall of physical investment.
RISE AND FALL OF PHYSICAL INVESTMENT
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/201812
$10
$12
$14
$16
$18
$20
$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
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Total ETF holdings stable in contrast to increasing Comex Stocks
PHYSICAL INVESTMENT AND COMEX STOCKS
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/201813
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
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SILVER SPECULATIVE DASHBOARD
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/201814
$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
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WHAT FACTORS INFLUENCE INVESTOR DEMAND FOR SILVER?
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/201815
USD
Tariffs
Geo
Politics
China
Equities
Global
Growth
Crypto
Currencies
Inflation
Monetary
Policy
Gold
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$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
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/201816
Speculative Investors In Speculative Investors Out
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BOSTON TEA PARTY - YES OR NO?
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/201817
Let’s discuss this over a cup of tea – Cheers!
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DISCLAIMER
LBMA Boston | David Holmes | Heraeus Precious Metals10/30/201818
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