World 2016 silver mine output sees first drop in 14 years: GFMS

FILE PHOTO: An employee pushes a cart with ingots of 99.99 percent pure silver at the Krastsvetmet non-ferrous metals plant, one of the world's largest producers in the precious metals industry, in the Siberian city of Krasnoyarsk, Russia October 24, 2016. REUTERS/Ilya Naymushin

NEW YORK (Reuters) - Global silver mine production dropped in 2016, falling for the first time in 14 years while demand for the precious metal in the solar sector surged to a record, said Johann Wiebe, senior metals analyst for Thomson Reuters GFMS on Thursday.

Silver mine production fell 0.6 percent to 885.8 million ounces, the lowest since 2002, largely due to lower by-product output the from lead, zinc and gold sectors as well as lower silver scrap supply, said Wiebe.

Wiebe highlighted results of the World Silver Survey 2017, which was released by the Silver Institute and produced by GFMS.

Total silver supply in 2016 fell by 32.6 million ounces to 1.007 billion ounces, the survey showed.

On the demand side, solar panel and ethylene oxide sectors, growing industrial applications for silver, rose to records at 76.6 million ounces and 10.2 million ounces, respectively.

Silver is used as a catalyst to produce ethylene oxide, an essential ingredient in plastic, including polyester.

Despite higher silver prices, global silver scrap supply fell to 139.7 million ounces in 2016, down from 141.1 million ounces in 2015 and the lowest level since 1996, Wiebe said.

Physical and exchange-traded product investments fell to 253.8 million ounces in 2016, down 7 percent from 2015. This was, however, 23 percent higher than the average for the decade preceding 2015.

Total physical silver demand fell by 11 percent to 1.03 billion ounces, due to weaker jewelry and silverware off take as well as retail investment. The largest component of physical demand - industrial applications - fell 1 percent to 561.9 million ounces, Wiebe said.

Reporting by Marcy Nicholson; Editing by Bernard Orr