Chile, the world's fifth-largest silver producer, saw its production fall 32% in May from a year earlier. Chile, which produced a record 54 million ounces of silver in 2014, is expected to produce less than 40 million ounces in 2018.
Moreover, preliminary statistics from several of the world's largest silver producers suggest that production will continue to fall from its 2015 global peak.
If production in some of the world's largest silver producers continues to fall through the rest of 2017, global silver production will decline for the second year in a row. Global silver production peaked at 891m ounces in 2015 and fell to 886m ounces in 2016.
Assuming that world silver production will decline by 2-3% in 2017, world silver supply is expected to fall to 850-865 million ounces.
Precious metals are on the cusp of a rally, and silver's massive backwardation will fuel a retaliatory rally. In recent weeks, short positions have ballooned to December 2015 levels, while silver prices rebounded sharply in the first quarter of 2016. Despite the silver rally, both short and long positions have fallen further in the past week. The decline is lower than at the end of 2015. Gold prices are roughly the same as last week, and continue to rise, with the precious metal increasingly likely to double.
