The silver market’s supply picture is tightening. Mine output from Peru, the world’s second-largest silver producer, fell 3.8% year-over-year in the first quarter. Ore grades are declining at several flagship mines, and no major new primary silver projects are scheduled to start production before 2028.
Mexico, the largest producer, saw a 2.5% decline. Labor disputes and regulatory delays affected output at several key operations. The Fresnillo mine, the world’s largest primary silver operation, reported a 4% drop in processed tonnage.
The structural deficit is projected at 4,200 tonnes for 2026, the fifth consecutive year of deficit. Above-ground inventories at the London Bullion Market Association (LBMA) and COMEX have drawn down to 28,500 tonnes, the lowest level since records began in 2016.
“We’re consuming more silver than the world produces, and there’s no supply response coming in the near term,” a metals analyst at CRU Group noted. “The deficit is being filled by inventory, and inventories are near critical lows.”
A market running a structural deficit with declining inventories means buyers face persistent upward price pressure. Negotiate annual contracts with price escalation clauses tied to the LBMA silver price. Building strategic buffer inventory now, rather than waiting for supply to loosen, protects against spot market dislocations.