cant effect on the silver market and, therefore, on the prices paid by commercial users.

Prices climbed throughout the year, spurred on by speculative activity and the increasing uncertainty in world economics. New records became commonplace and the year closed at 2800.0¢ which established a new all-time high. The dramatic developments of 1979 even exceeded the performance of the market in 1974. In just one year the price of silver went from a low of 596.1¢ an ounce to 2800.0¢ an ounce. This performance must be characterized as truly astounding. Furthermore, the high of 1979 scarcely lasted over the year-end and was quickly surpassed by substantial margins in the opening days of 1980.

Silver in the United States

The New York Market: Spot prices in the New York market are substantially determined by prevailing quotations on the New York Commodity Exchange, generally referred to as COMEX. The Exchange provides a broad trading market in silver futures contracts, and major suppliers of silver to industrial users, including producers and dealers, base their offering prices on COMEX quotations. As a result the Handy & Harman price, which is issued at Noon each business day, usually reflects the level of prices on COMEX at that time. Unless otherwise specified, all references to the New York price in this section refer to the Handy & Harman quotation. The chart on page 8 shows the monthly high, low and average of the daily silver prices as published by Handy & Harman for the years 1974 through 1979.

As demonstrated by the accompanying chart, the New York silver price increased dramatically throughout the year. The year opened with the price at 596.6¢ an ounce, and on January 11 it dipped to 596.1¢, which proved to be the low for the year. Thereafter, an upward price trend developed and carried

the quotation to 2800.0 by December 28, which was the high for the year.

Price Definition: The price referred to in the above market discussion is the New York Silver Price as published daily by Handy & Harman. The definition of this price is as follows:

"The daily silver quotation reported by Handy & Harman, in cents and tenths of a cent per troy ounce, is the lowest price at which offers can be obtained by Handy & Harman for silver in commercial bar form, in accordance with ASTM Designation: B413-69 Specification for Refined Silver, Grade 99.90 for nearby delivery at New York, in quantities sufficient to meet its requirements."

The New York Commodity Exchange designates certain brands of silver which are acceptable as good delivery against contracts on the Exchange, but it does not require conformity to ASTM specifications. It requires only that such silver be no less than 99.9% pure without reference to impurities. The ASTM specifications set maximum limits on impurities, and this is very important for commercial users. Therefore, the price published by Handy & Harman is somewhat different from comparable quotations on COMEX.

Silver Futures: Trading in silver futures on the New York Commodity Exchange set new records in 1979. A total of 4,080,619 contracts of 5,000 ounces each were traded, amounting to 20.4 billion ounces of silver. This is an increase of 7%, compared with 19.1 billion ounces traded in 1978. Stocks in COMEX-licensed vaults at the end of 1979 amounted to 73,800,000 ounces, up substantially from the 58,200,000 ounces at the end of 1978.

The volume of trading on the Chicago Board of Trade also set new records. A total of 2,720,589 contracts of 5,000 ounces each were traded, equivalent to about 13.6 billion ounces of silver compared to 13.3 billion ounces for the previous year.

In the statistical table on page 24 we have broken down our estimates of major categories of use, compared with the last four years. As in the past, our estimates are based on data published by the Bureau of Mines. There were a number of shifts in 1979 compared with 1978 among the various categories of usage. We call particular attention to the sharp Increase in the consumption of silver for the "Contacts and conductors" and "Electroplated ware" categories. "Contacts and conductors" increased 18% to 36,500,000 ounces and "Electroplated ware" increased 27% to 9,300,000 ounces. These gains were partially offset by declines in the "Sterling ware" and "Jewelry" categories.

Exports during 1979 amounted to about 23,000,000 ounces and were about the same as our revised 1978 figure. Export to the United Kingdom were lower and totaled 5,200,000 . aunces. This compares with 6,100,000 ounces shipped in the previous year. In addition, about 7,300,000 ounces wel shipped to Japan, about 5,000,000 ounces were shipped Switzerland and 5,500,000 ounces to various other countrie Legislative Developments: Once again the Congress failed take action on pending legislation authorizing disposal 139,500,000 ounces of silver held in the strategic stockp The question of silver stockpile objectives has been under consideration since 1973. All indications are that there still strong Congressional opposition to the disposal of the silver stockpile. However, there remains the possibility that the

122

Congress may take action, perhaps on the basis of some comme regarding quantities and timing of sales. Meanwhile, fiver continues to be a potential source for United States

Review of Other Markets

World consumption of silver during 1979 for industrial and ainage uses combined, excluding Communist-dominated areas, was about 432,800,000 ounces, virtually unchanged om our revised 1978 figure. Industrial consumption was about 410,000,000 ounces, an increase of about 2% from the previQus year. The increases recorded in the United States and West Germany were offset by declines in the United Kingdom and Italy. Coinage consumption declined somewhat to 22,800,000 ounces from 29,000,000 ounces in 1978.

World mine production of silver, excluding Communistdominated areas, amounted to about 271,000,000 ounces during 1979, an increase of 2% over our revised 1978 figure. Mexico, the world's leading producer of silver, increased its output 10% in 1979 to 56,000,000 ounces. Mine production in the next three largest producing countries, United States, Canada and Peru, remained unchanged and was approximately 38,500,000 ounces each.

Silver supplied from secondary sources during 1979 declined 15% to 131,700,000 ounces compared with 154,500,000 ounces in 1978. The largest reduction was in silver supplied from India which decreased about 26% during 1979 to an estimated 33,500,000 ounces. Refining production of silver from salvage and other miscellaneous sources amounted to 80,500,000 ounces according to our estimates. This represents a decline of about 7% from 1978.

United Kingdom: Consumption of silver for industrial uses in the United Kingdom during 1979 was about 26,500,000 ounces, a decrease of approximately 9% from 1978. Imports for the

13

year in refined and unrefined form are estimated at 36,500,000 ounces, a decrease of 13%. The largest amount came from West Germany which supplied approximately 6,000,000 ounces. Other significant sources were India, the United States, Mexico and Australia.

Exports of silver for 1979 were about 35,000,000 ounces of which about 12,000,000 ounces were shipped to France. Other countries included the United States, West Germany, France, Switzerland and Italy.

The daily quotation for prompt delivery issued by the London Silver Market ranged from a high of 1446.8 pance, reached on December 3, 1979, to a low of 296.4 pence, established on January 5, 1979. In dollar terms the high was 3220.0 cents on December 31, 1979, and the low was 593.5 on January 12, 1979. These prices were based on sterling exchange rates in effect at the time.

West Germany: Industrial consumption of silver in West Germany during 1979 amounted to about 37,100,000 ounces according to our estimates. This represents an increase of about 40% from the 1978 level, which was unusually low. Coinage consumption amounted to about 3,700,000 ounces, about the same as the previous year. Domestic mine production for 1979 amounted to about 600,000 ounces, a decrease from the previous year, and smelter production from foreign ores amounted to 15,600,000 ounces. To our knowledge, no German coins were meited, refined or used by industry in 1979.

Imports in both refined and unrefined form totaled about 42,300,000 ounces, of which about 4,800,000 ounces came from the United Kingdom; 10,900,000 ounces from Switzerland; 3,200,000 ounces from Belgium; and the balance from various other countries. Exports amounted to an estimated 21,300,000 ounces with the principal countries of destination being Italy, Sweden and the Netherlands.

France: Consumption of silver for industrial uses in France during 1979 amounted to about 21,500,000 ounces, down 3% from 1978. Coinage consumption was about 7,700,000 ounces compared with about 11,100,000 ounces in the previous year. Production amounted to 15,600,000 ounces, almost double the 1978 level of 7,400,000 ounces. Government stocks of about 2,900,000 ounces were virtually unchanged from the previous year.

Imports of silver into France during 1979 amounted to about 30,700,000 ounces, down 9,000,000 ounces from our revised 1978 figure. The principal countries from which silver arrived were the United Kingdom, which shipped some 11,400,000 ounces; Switzerland, 3,700,000 ounces; Belgium, 2,900,000 ounces; Mexico, 1,400,000 ounces; and various other countries, the balance of 11,300,000 ounces. Exports totaling 12,200,000 ounces were down from the previous year's amount of 13,600,000 ounces. The principal countries to which silver was exported were the United Kingdom, Spain and Switzerland. Canada: Production of silver in Canada during 1979 amounted to about 38,100,000 ounces, a decline of 4% from 1978. The country continues to be one of the largest producing nations in the non-Communist world. Silver consumed for industrial uses amounted to about 9,200,000 ounces, an increase of 2% over 1978. Coinage consumption amounted to 300,000 ounces in 1979, the same as the previous year.

Imports of silver into Canada were virtually unchanged for the year and amounted to 1,100,000 ounces. Exports for 1979 are estimated at about 43,500,000 ounces, most of which was shipped to the United States. This compares with 47,000,000 ounces exported during the previous year.

Mexico: Silver production in Mexico in 1979 amounted to 56,000,000 ounces, an increase of 10% over our revised figure of 50,800,000 ounces for 1978. Mexico continues to be the

15

number one producing nation in the world. Industrial consumption in Mexico amounted to about 6.200,000 ounces, an increase of 7% over 1978. Coinage consumption amounted to about 3,000,000 ounces, which was down substantially from the 7,300,000 ounces used the previous year. Government stocks at year-end were approximately 7,000,000 ounces, virtually unchanged from the previous year.

Exports from Mexico during 1979 amounted to 29.000.000 ounces About 20,000,000 ounces were shipped to Europe, and the balance to the United States and Japan.

Japan: Japan's silver consumption has continued to expand and that country is now the second largest world silver user. Consumption of silver for industrial uses in Japan increased about 2% during 1979 to an estimated 65,500,000 ounces. We estimate that about one-half of the Japanese consumption is for photographic materials.

Once again, no silver was used in coinage and the Government has no plans to mint coins containing silver in the future. Mine production was about 4,000,000 ounces, about the same as the previous year. Government stocks are estimated to be about 2,500,000 ounces at the end of 1979, a decrease of about 2,000,000 ounces compared with 1978.

India: For many years India has been an important source of silver to world markets. However, silver is not produced in India and whatever silver is exported comes out of stocks which were accumulated through the centuries. The Government of India is conscious of this fact and hence they attempt to regulate the export of silver. On February 20, 1979, the Government decided to ban export of silver. Consequently, exports of silver dropped to 14,500,000 ounces during 1979, a reduction of 43% from the previous year. Consumption of silver in India amounted to 19,000,000 ounces. a decrease of

16