The domestic market has also reacted and moved in tandem with the global trend. The silver prices at home is now Rs 7,600 per kg.

The latest fall in the international markets has been very steep, the figures released by the Silver Institute in Washington suggest a strong fundamental backing. If one were simply to go by these figures, Warren Buffet's huge investments in silver should not have come as a big surprise.

According to the World Silver Survey 1998, for the ninth consecutive year, the conventional supply failed to keep pace with fabrication demand. Silver demand exceeded supply from mine production and the recycling of scrap by 198 million ounces in 1997.

Strong demand from India and surging industrial demand in the United States resulted in record silver offtakes last year, totalling863.4 million ounces. Increase in the mine supply and scrap recycling were insufficient to meet the rise in fabrication demand last year. Between 1990 and 1997, cumulative silver fabrication demand far exceeded mine productions by 2,226 million ounces. The gap has been bridged by recycled silver scrap.

With an import of 112.4 million ounces in 1997, the Indian subcontinent remained a dominant player in the global market. During 1996, it has imported 113.5 million ounces.

A 6.1 per cent increase (or 49 million ounces) in fabrication demand last year raised the total silver offtake to 863.4 million ounce. This increase was primarily due to developments in the industrialised world, with offtake up 4.5 per cent in Europe, 7.7 per cent in North America and 13.5 per cent in Japan. North American demand was almost 194 million ounces, with United States consuming 167 million ounces of that total. Again, India was the second largest user of silver at 131 million ounces, followed by Japan, where offtakes totaled127.2 million ounces.

According to the survey, the largest world growth came from the Industrial sector, up 7.4 per cent for a total offtake of 323.4 million ounces. Electrical products and electronics, were up 12 per cent for the year and accounted for much of the increase. This growth has mainly been driven by development of new technologies and products that rely on silver's properties of superior electrical and thermal conductivity. Over the past five years, silver demand for industrial uses in the US increased by more than 40 per cent to a record 70 million ounces in 1997.

After a spectacular 15.6 per cent surge in 1996, jewellery and silverware grew another 5.3 per cent in 1997 to 280.2 million ounces. Nearly all of the growth was accounted for by Italy, where offtakes rose from 10.5 per cent to 44.8 million ounce, and India, where offtake grew by 3.2 per cent to 95.2 million ounce. Two-third of India's silver demand is in jewellery, silverware, and gift items. The fabrication of silver for use bythe world's photographic sector rose by 3.5 per cent to 232.3 million ounce in 1997, representing 27 per cent of total silver fabrication demand.

Consumer photography has been the fastest growing segement in this sector, and together with radiography, accounts for three-quarter of total worldwide photographic demand. Major manufacturers have significantly increased their film and paper production capacity throughout the world. While most of the photographic fabrication increase during 1997 occurred in the US, the largest manufacturer and consumer of photographic products, the fastest growing areas of demand are in the developing world.

With the demand expected to grow at six per cent plus, industry observers expect prices to remain firm at least in the short-term. As ML Damani, president of the Bombay Bullion Association says,"the prices are likely to remain firm in the coming months simply because a large part of correction is over. Weakening position of gold may also result in a shift in the demand."For long term too, with falling stocks and rising demand, outlook appears bright.

Global supply increases 4.8 per cent

On the supply front, global silver mine production increased in 1997 to 512.6 million ounce, a 4.8-per cent increase over 1996. This was the third consecutive year of an upswing in output, after a four-year lull and the second highest ever recorded after 1990's record 520-million ounce.

Fifteen countries produced 94 per cent of the world's silver last year. Mexico continued to be the largest producer of silver, increasing its output to 86.2 million ounce. For the second straight year, Mexican producer Industrias Penoles topped the list of silver producing companies, and contributed more than a third of total Mexican production in 1997.

Recycled silver scrap accounted for nearly 18 per cent of total supply last year, the report says. The supply of silver from the recycling of old silver scrap increases only marginally last year to a total of 152.5 million ounce.