Silver Market Enters Fifth Consecutive Year of Supply Deficit as Industrial and Investment Demand Grows

The silver market has entered its fifth consecutive year of supply deficit, with industry experts warning that few new primary silver mines are coming online to address the growing gap between production and consumption.

“It’s a structural deficit here in the fifth consecutive year of supply deficit. And new mines coming online aren’t going to fill that gap very rapidly because there simply aren’t very many silver primary mines,” explains Michael Konnert, Founder, CEO and President of Vizsla Silver.

This fundamental imbalance forms the cornerstone of a bullish outlook for silver prices, as approximately 70% of global silver production comes as a byproduct from mining other metals, particularly copper, lead, and zinc.

Unlike gold, silver’s market dynamics are split between industrial and investment demand, with roughly half of consumption coming from manufacturing applications. This dual nature creates what industry leaders describe as “two ways to win” for investors – benefiting from both industrial growth and precious metal safe-haven status.

Industrial demand continues to strengthen, particularly from solar panel production in China and other renewable energy applications. As the global transition to green energy accelerates, silver’s role as an essential component in photovoltaic cells ensures steady consumption growth.

“When we speak to investors, they see silver as having two ways to win. Gold has started to really capture people’s imagination, and with the recent moves in gold, it’s somewhat general knowledge that once gold has its moves, typically silver follows in a lag position behind gold and then turns to outpace gold in terms of percentage movement,” Konnert notes.

The challenge of developing new silver mines further constrains supply. Industry veteran Lon Shaver, President of Silvercorp Metals, points out: “It’s hard to find them, and given today’s challenges with communities, government, and permitting, it is a real hurdle to move projects ahead.”

These obstacles extend beyond discovery and permitting to escalating development costs. “If you model the cost inflation for miners, it’s about an 8% annual cost inflation going back over history,” Konnert explains. This inflation affects everything from equipment to labor, making new mine development increasingly expensive and raising barriers to entry.

Leading silver companies are adapting their strategies to capitalize on these favorable market dynamics. Silvercorp Metals, an established producer generating profits since 2006 from operations in China, is expanding its footprint through the acquisition of the El Domo project in Ecuador, currently under construction with production expected in late 2026.

“We’ve proven execution capability. You can see what we’ve done in terms of growing our production profile and managing our costs. Now that we’re in a more favorable pricing market, we’re showing that we can move the top line growth from production and pricing increases to bottom line earnings and cash flow,” Shaver explains.

Meanwhile, Vizsla Silver is developing what could become one of the world’s most significant primary silver projects. The company’s flagship Panuco project in Sinaloa, Mexico represents a district-scale silver property consolidated for the first time in modern history. With over 400,000 meters of drilling completed, the project boasts exceptional economics.

“The PEA numbers were spectacular. A capex of $224 million with an NPV at $26 silver and sub-$2,000 gold that was five times capex. Today it’s seven and a half times NPV to capex ratio, which is unlike anything I’ve seen before…Triple digit IRR at these prices, probably less than a six-month payback,” Konnert highlights.

Vizsla is currently advancing a test mine, having completed its portal and progressed underground. The company aims to complete its feasibility study by the end of 2025 and targets first silver production in 2027.

Interestingly, geopolitical tensions are creating unexpected positive conditions for mining in certain jurisdictions. In Mexico, where Vizsla operates, recent political developments have improved the climate for mine development.

“When your major trading partner starts to get hostile, you start looking at home and seeing what you can do to boost your economy and create jobs,” Konnert observes. “We’ve started to see an improved level of interest in permitting mines in Mexico and positive attitudes toward job-generating activities like what we’re doing.”

Environmental, Social, and Governance (ESG) considerations remain important for mining companies, though their prominence in investor discussions has somewhat moderated. Both Silvercorp and Vizsla emphasize responsible mining practices as fundamental to their business models.

“ESG is funny because it has a higher profile depending on what’s going on around the world at the time. But really what ESG is just good business,” explains Konnert. “We’ve always approached from day one at Vizsla, before we even had a rig turning, coming at it from a position of ‘we’re going to be part of this community.'”

For investors, silver mining equities offer greater leverage to rising prices than ETFs or physical metal, though these investment vehicles have captured significant capital flows by making it easier for generalist investors to gain exposure to the metal.

With persistent supply deficits, growing industrial demand, increasing investor interest, and the dual nature of silver as both an industrial metal and a precious metal, the outlook for the silver market in 2025 and beyond appears increasingly positive. Companies with established operations and advanced development projects are particularly well-positioned to benefit from these favorable dynamics.