Higher Copper Prices Exacerbate Silver Shortfall as Producers Shift to Leaching

Copper production has deepened the structural case for silver as miners have adjusted their processes to respond to higher copper prices. In the first half of this year, copper producers reduced concentrate output by 2.6% and increased leached cathode output by 4.3%, with Chile's output falling 6.6% and Indonesian concentrate production dropping 32%. This shift has exacerbated a silver shortfall forecasted at 46.3 Moz for 2026.

The decline in copper concentrate output is particularly concerning, as this process typically carries silver along with the copper. In contrast, leached cathode production, which does not carry silver, rose significantly. The consequences of this shift are that a higher copper price will bring more copper to market without necessarily increasing the amount of silver produced.

The impact on silver investors is significant, as it suggests that even if copper prices continue to rise, there may be limited upside for silver producers. While some mines, like Collahuasi in Chile, are considering restarting idled acid-leaching plants, others, such as Capstone's Mantoverde mine, have shifted towards sulphide concentrate production, which carries less silver.

The implications of this trend are far-reaching and could have significant effects on the global silver market. As one analyst noted, 'most silver is mined by accident,' highlighting the challenge faced by investors trying to predict supply responses to price changes.