Huaan Securities: Financial attributes + weak supply and strong demand, silver price central upward movement

According to the report released by Huaan Securities, based on data from the Silver Institute, the total global silver supply/demand in 2024 is expected to be 31,574/36,207 tons, resulting in a supply-demand gap of -4,633 tons. Since 2021, the global silver market has consistently shown a supply shortage, and it is expected that there will still be a supply-demand gap of 3,660 tons in 2025. The supply-demand gap mainly arises from the increase in photovoltaic demand. In terms of financial attributes, gold has stronger financial and hedging properties than silver, but silver possesses a unique dual attribute of industrial and financial use. Therefore, during economic downturns, passive selling of silver combined with declining demand leads to an expansion of the gold-silver ratio. With interest rate cuts expected to resume in 2025, the market anticipates that the Federal Reserve will likely cut rates consecutively in October and December, and with quantitative easing and a rebound in industrial demand, silver prices are expected to maintain an upward trend.

The main points from Huaan Securities are as follows:

Supply is relatively concentrated and shows a contraction trend

Global silver mining output has shown a fluctuating downward trend, decreasing from 274,000 tons in 2014 to 252,000 tons in 2024, with Mexico accounting for 23% of global production. The CAGR of recycled silver supply from 2019 to 2024 is 3.4%, while the CAGR of mine output during the same period is -0.4%. The increase in silver prices has driven up recycling volumes. However, due to the low base, the incremental contribution of recycled silver is limited, and disturbances in mine supply, such as declining grades, make silver supply relatively rigid.

There is a gap in supply and demand, and risk aversion sentiment catalyzes investment demand

According to data from the Silver Institute, the total global silver supply/demand in 2024 is expected to be 31,574/36,207 tons, resulting in a supply-demand gap of -4,633 tons. Since 2021, the global silver market has consistently shown a supply shortage, and it is expected that there will still be a supply-demand gap of 3,660 tons in 2025. The supply-demand gap mainly arises from the increase in photovoltaic demand, with global silver usage in photovoltaics expected to reach 6,147 tons in 2024. The CAGR of silver demand for photovoltaics from 2014 to 2024 is 15.09%. Since 2025, geopolitical conflicts have heightened risk aversion sentiment, leading to increased silver investment demand, with both industrial and hedging demands growing.

With multiple attributes supporting, silver prices are fluctuating upward

Gold has stronger financial and hedging properties than silver, but silver possesses a unique dual attribute of industrial and financial use. Therefore, during economic downturns, passive selling of silver combined with declining demand leads to an expansion of the gold-silver ratio. Major events that catalyze hedging properties lead to simultaneous increases in gold and silver, but the growth rate of gold is higher than that of silver. When manufacturing demand expectations are strong, silver prices increase more rapidly. With interest rate cuts expected to resume in 2025, the market anticipates that the Federal Reserve will likely cut rates consecutively in October and December, and with quantitative easing and a rebound in industrial demand, silver prices are expected to maintain an upward trend.

Investment recommendations

The combination of financial attributes, hedging properties, and the commodity attributes of weak supply and strong demand will drive silver prices to continue rising, with global precious metal prices at a cyclical high. It is recommended to pay attention to SDR (000603.SZ): projects such as Jinshan technological transformation, Silver Capital integration, and Dongsheng Bayannur silver polymetallic mine are gradually being implemented, ensuring growth in silver reserves and output; related company Xingye Silver Tin (000426.SZ): as of the first half of 2025, it holds 30,600 tons of silver metal resources, ranking first in Asia, and is actively promoting the construction of the Silverman Phase II and Yubang expansion projects to drive subsequent output growth Risk Warning

Macroeconomic environment affects precious metal prices: The current international situation is volatile, and any changes in geopolitical situations, U.S. diplomacy, or economic policies may impact precious metal prices;

Silver supply exceeds expectations: Silver prices require strong support from demand; if there is an unexpected increase in supply, it may lead to a short-term oversupply situation, thereby suppressing silver prices;

Photovoltaic demand is below expectations: Rising silver prices may suppress downstream industrial demand; if photovoltaic demand declines or alternative technological solutions are sought, it may affect silver demand;

Project construction is below expectations: If the construction progress of silver mining projects is slow, it will affect the performance of corresponding listed companies, thereby impacting sector returns