New Report: The Chinese Silver Market

The Silver Institute and Thomson Reuters published a report of 25 pages about the Chinese Silver Market. In it, the market structure is presented detailed by supply and demand, imports and exports, and outlook.

In a nutshell, China became the world’s second largest silver fabricator and is on its way to be the second largest producer. Its share in global demand stands at 17% while global supply at 14%.

The executive summary contains the following two paragraphs which represent a high level overview of silver’s supply and demand in China:

Chinese silver mine production has been on a steadily increasing trend, more than doubling over the last decade or so. Crucial to this has been a rapid development in the country’s base metals mining sector, which in turn has led to a sharp rise in silver produced as a by-product. In contrast, the growth in primary silver mines has been more restrained, with supply from this area only accounting for 6% of the country’s mine production last year.

Turning to demand, Chinese industrial silver fabrication has enjoyed an almost uninterrupted period of growth over 2000-11, averaging 11% per annum, helped by a combination of factors such as a positive economic backdrop and the relocation of manufacturing capacities from mature economies to China where production cost are markedly lower. The country’s rapid economic growth and associated rise in disposable incomes have also spurred consumer discretionary spending, with silver jewelry and silverware being a notable beneficiary.

The expectations from the researchers are that silver demand and supply will achieve even further growth in the years ahead.

One additional chart is worth showing. It represents the turnover and open interest in two commodity exchanges in which silver is trading. The Shangai Gold Exchange (SGE) launched in 2006 a physical silver contract and a futures contract. The Shangai Future Exchange (SFE) started trading only in May of this year a silver futures contract. The growth in trading volumes and open interest speak for themselves.

Receive these articles per e-mail

Subscribe for the free weekly newsletter and receive 3 papers about physical precious metals investing