Silver Rally Hides Structural Deficit as Lead and Zinc Mines Cut Production

The silver market is experiencing a rally, but its biggest supply source, lead and zinc mines, has seen a significant decline in production. According to the International Lead and Zinc Study Group, world zinc mine production fell 2.6% and world lead mine production fell 3.0% in the first half of this year.

This decline is not due to a depletion of ore reserves, but rather because of changes in mine plans and budgets that prioritize other metals over silver. The largest single source of byproduct silver, which accounts for 73.9% of global supply, comes from lead and zinc mines.

A record-low negative treatment charge for imported zinc concentrate in China also indicates a shortage of raw materials. This means that smelters are paying miners to process ore, rather than earning a fee for turning it into metal.

While the decline in production is significant, with 7 Moz annualised at the midpoint, it only accounts for 0.83% of total mine supply forecasted for this year. However, it highlights the structural deficit in the silver market, which is expected to reach 46.3 Moz for 2026.