Demand dropped for the first time since 2001, falling by a modest 1.4% to 447 Moz in 2008.
Gains in the first half were fully offset by a fourth quarter collapse, mainly due to the abrupt slowdown in GDP growth.
In 2008 industrial uses accounted for 54% of global fabrication demand and 50% of total silver demand.
Loss was apparent in most sectors of end use, although some, for example, photo voltaic cells, continued to show growth.
Jewelry & Silverware
Jewelry demand fell for the fifth consecutive year by just above 3% year-on-year to 158.3 Moz.
Italy and Thailand accounted for around 75% of the gross losses, as exports were hit by lower consumption in major western markets.

Silverware: Offtake fell slightly by 2%. The decline in western markets, a result of secular trends, higher prices and the economic crisis, was broadly offset by higher demand in India, mainly due to stock replenishment.

Photography

Photographic demand declined by 16% in 2008, the largest annual drop on record in percentage terms.
Photography's share of total fabrication demand fell to 13% in 2008 compared to 26% in 1999.
Bulk of the losses came from consumer color film, due once again to ongoing shift to digital technology. Sale of color negative paper also dropped, albeit by less than film.
Silver use in medical radiography and motion picture film remained comparatively resilient.

World silver mine production grew by almost 3% or 16.7 Moz last year to a record 670.6 Moz.

Higher silver mine output from gold and lead/zinc sectors drove the increase.
Silver production from primary silver mines decline by 1% in 2008.
At a country level, most notable increases seen in Bolivia (+18.9 Moz) and Russia (+6.9 Moz) with by far the largest single decline coming from Chile (-17.1 Moz).

Scrap Supply

Scrap supply dropped by nearly 3% in 2008 in spite of a 12% increase in average dollar silver prices.
Indian jewelry scrap fell last year, partly due to higher price expectations in the first half and the price weakness towards year-end. In a number of other countries more silverware and jewelry scrap seen, especially when price at peaks.
Elsewhere, decline in photographic recycling concentrated in liquids and the consumer film segments.
Modest growth in recycling of electronic products, although recovery from Ethylene Oxide catalysts remained flat.

Government sales estimated at 31 Moz in 2008, down by 27% on previous years' levels.
Russia accounted for the bulk of government sales and disposals from the country fell by nearly a third in 2008.
Other official sales last year both small scale and related to melting of old coins.
Total government silver stocks conservatively estimated at 72 Moz at end-2008.

Outlook for 2009: Supply

Mine production forecast to fall slightly in 2009, with output expected to decline from all by-product sectors except gold.
Scrap supply is expected to fall this year, due to the ongoing downward trend in recovery from photographic products.
Government sales more likely to decline than increase.
Overall, supply set to decline by around 2% this year.

Industrial demand will see sharp fall in 2009, particularly in the electrical and electronic sector, reflecting the weak outlook for the global economy.
Photographic demand will drop again but decline in volume as opposed to percentage terms could moderate compared to 2008.
Jewelry forecast to be down modestly in 2009. Losses in western markets are expected to accelerate this year due mainly to the weak economy.
Silverware expected to drop: Secular shifts plus poor economic prospects.
Total fabrication demand in 2009 forecast by GFMS to fall by some 10%.
Investment in Jan-Apr 2009 has been strong. Much of the investment centered on ETFs and bullion products. Given that silver's supply & demand fundamentals will turn negative this year, a substantial surplus will have to be absorbed by investors.
Price will remain volatile this year and investors will become even more important to its level and direction. GFMS forecast silver over the next three months will trade between $11.50-$14.30, broadly shadowing gold. Later in 2009 a break-out to the upside is probable.