Silver's Sixth Consecutive Supply Deficit: What Singapore Investors Should Know

A Historic Streak: Six Years of Silver Deficits

The global silver market is heading into 2026 with a structural supply deficit for the sixth consecutive year — a streak that is unprecedented in modern precious metals history. Between 2021 and 2025, the accumulated shortfall reached an estimated 900 million ounces. For 2026, forecasts range from a deficit of 67 million ounces (Silver Institute) to as high as 245 million ounces (J.P. Morgan Global Research), depending on how China's new export restrictions play out.

For Singapore investors, this is not just a global commodity story. It has direct implications for silver prices, the gold-to-silver ratio, and the strategic case for holding physical silver as part of a diversified precious metals portfolio.

What Is Driving the Deficit?

Industrial Demand: Solar, EVs, and AI

Silver is not just a monetary metal — it is a critical industrial material, and that dual role is at the heart of the current supply crunch.

Solar panels (photovoltaics): Each standard solar module uses approximately 15 to 20 grams of silver paste. As global solar capacity continues to expand rapidly, silver consumption from this sector alone is enormous. Silver now accounts for an estimated 17% to 29% of photovoltaic module costs per watt, up from just 3% in 2023. While manufacturers are working to reduce silver intensity per panel, the sheer scale of solar deployment means total demand remains very high. Electric vehicles (EVs): EVs consume 67% to 79% more silver per vehicle than traditional internal combustion engine cars, due to complex power electronics and control systems. The automotive industry is projected to account for 59% of silver's industrial share by 2031. AI and data centres: Silver is a critical material for AI infrastructure, 5G networks, semiconductor packaging, and advanced chip design. As the global AI buildout accelerates, this demand channel is growing rapidly.

China's Export Restrictions: A Game-Changer

Effective 1 January 2026, China implemented a new licensing regime for silver exports, reclassifying it as a strategic material. Only 44 companies now qualify to export silver, and eligibility is tied to specific output and credit line requirements. Analysts at Peel Hunt estimate that 60% to 70% of global refined silver supplies could be affected by this policy.

The result has been a fragmentation of the global silver market into regional silos, with silver lease rates surging to around 8% by January 2026 — a clear sign of severe physical supply tightness. Institutional investors demanding physical delivery have been draining COMEX and LBMA inventories, creating what some analysts describe as a structural credit crisis in the paper silver market.

Mine Supply Cannot Keep Up

Global silver mine production grew by only about 2% in 2025 to 830 million ounces, and is forecast to rise just 1% in 2026 to around 820 million ounces. Mexico, the world's largest silver producer, is not expected to significantly increase output due to declining ore grades and operational challenges. The fundamental problem is that most silver is produced as a by-product of mining other metals such as copper, zinc, and lead, which means supply cannot respond quickly to price signals.

Price Outlook for 2026

Silver prices gained almost 150% in 2025, reaching a record high of US$58.63 per ounce in December 2025. In early 2026, spot prices rose above US$93 per ounce before pulling back. For the full year, forecasts vary widely:

• •Heraeus Precious Metals: US$43 to US$62 per ounce
• •Peel Hunt: US$75 per ounce average
• •J.P. Morgan Global Research: US$81 per ounce average

The gold-to-silver ratio, which measures how many ounces of silver it takes to buy one ounce of gold, has been highly volatile — reaching 105x in April 2025 before compressing to 50x. Historically, a high ratio suggests silver is undervalued relative to gold, and many analysts expect the ratio to compress further as silver's industrial and investment demand accelerates.

Investment Demand Is Also Surging

It is not just industrial users driving the deficit. Investment demand for silver has surged dramatically. Net inflows to silver-backed ETFs reached almost 150 million ounces in 2025, with total holdings rising to 864 million ounces by December 2025. Emerging market central banks, including those of Russia, India, and Saudi Arabia, have also begun accumulating silver as a strategic reserve asset amid de-dollarisation efforts.

The US government's decision to add silver to its Critical Minerals list has further reinforced the strategic narrative around the metal, potentially opening the door to Section 232 tariffs that could further tighten supply for non-US buyers.

What This Means for Singapore Investors

Singapore investors are well-positioned to benefit from the silver story, thanks to the city-state's favourable tax treatment of Investment Precious Metals. Silver bullion that is at least 99.9% pure and meets IRAS criteria is exempt from the 9% GST, and there is no capital gains tax on profits.

Key considerations for Singapore investors:

1. Physical silver — Buying GST-exempt silver bars or coins from reputable dealers like BullionStar, GoldSilver Central, or Silver Bullion (The Safe House) gives you direct exposure with no counterparty risk. Given the tightening physical market globally, owning allocated silver in a Singapore vault is a prudent hedge.

2. Silver ETFs — For investors who prefer not to prefer not to handle physical metal, silver ETFs traded on international exchanges provide liquid exposure. Be mindful of US estate tax implications if using US-listed products.

3. Portfolio allocation — Many precious metals analysts suggest a gold-to-silver ratio in your portfolio of roughly 3:1 or 4:1 by value, reflecting gold's greater monetary role while capturing silver's higher upside potential.

4. Dollar-cost averaging — Given silver's well-known price volatility, spreading purchases over time reduces the risk of buying at a short-term peak.

The Bottom Line

The structural forces driving silver's supply deficit — green energy transition, AI infrastructure growth, China's export restrictions, and surging investment demand — are not going away in 2026. For Singapore investors, silver represents a compelling opportunity to diversify a precious metals portfolio beyond gold, with the added benefit of Singapore's GST exemption making physical ownership particularly cost-effective. As always, position sizing and a long-term perspective are key to navigating silver's characteristic volatility.