Gold News

China's Silver Demand 'Peaked 2013, Not 2010'

Now set to grow again, supporting 2015 prices. Paste "in short supply"...
 
CHINA'S SILVER demand in 2014 was "marginally lower" from 2013 despite the economy growing, says a leading precious metals analyst, but still recorded its second strongest annual level.
 
Now further growth in 2015, says Mitsui Global Precious Metals analyst David Jollie – pointing to China's solar, automotive and electronics sectors – will help support silver prices.
 
Jollie's analysis confounds the market's broader view that China's silver demand peaked with imports of refined bullion in 2010.
 
For instance, worries about "a slowdown in economic activity [in 2013] further undermined investor interest in silver," as the World Silver Survey from metals consultancy GFMS, part of the Thomson Reuters data and news group, puts it.
 
But looking also at the level of silver stockpiles reported by the Shanghai Futures Exchange, as well as mine production and inflows of silver ores and concentrates, Jollie's analysis suggests China's total demand reached above 6,200 tonnes in 2013.
 
On his analysis, that marked a 50% jump from 2012 as world prices sank at the fastest pace in almost three decades.
 
"Overall silver demand in China appears to have fallen in 2014," says Jollie, but perhaps by only 2% to remain "strong by historical standards."
 
Looking ahead, the loss of investor interest in silver "suggests that the underlying fundamentals might become more relevant in price formation," with scope for a boost to 2015 prices both from Chinese industrial use and also "a resurgence" of commodity financing deals.
 
These financial deals saw commodities – as yet unpaid for – stockpiled and used as collateral for new loans. Plunging metals prices, together with a clampdown by Beijing, spurred a collapse in this trade. But Jollie suspects that "new financing mechanisms will be established," and silver's high value-to-weight ratio compared with copper and aluminium could see strong demand.
 
China is now the third-largest silver mining nation, still behind Mexico but doubling its output since 2003 to come just behind Peru. It is the single largest industrial user of silver according to Thomson Reuters GFMS, accounting for 30% of 2013 consumption by the manufacturing, electronics, solar, chemicals, electrical, brazing and alloys industries worldwide.
 
Now in 2015, silver paste – a key component in photovoltaic cells for solar energy – is " in short supply" according to materials consultancy CCM.
 
Beijing wants China to add 15 gigawatts of solar power in 2015, having installed 13GW last year and with a total target of 70GW by 2018.
 
But while China's demand for silver to use in solar-panel installation rose sharply ahead of the 2011 price peak, its importance was over-stated by some investment commentary. So-called 'thrifting' by the solar industry since then has dramatically reduced the amount of silver used, cutting it by 70% in standard cells.
 
More broadly, and with China's outstanding stockpiles of silver "having fallen recently," says Jollie, "we believe net silver imports will rise this year" in line with China's expected 7% GDP growth. That should give "a degree of support or upwards impetus" to world prices.

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