In recent months, China’s silver imports have remained high: reaching approximately 390 tons in December last year, the highest in three years, before falling and then surpassing 340 tons again in April this year, with an average monthly import volume of around 310 tons over the past five months. Market participants point out that in the coming weeks, China’s silver imports may surge further as strong domestic demand drives domestic silver prices far above international market prices.
Driven by robust industrial demand and expectations of a Fed rate cut, silver prices have soared to their highest levels since 2012. By the end of May, following in the footsteps of gold, silver prices also confirmed a breakout technically, with the monthly close price on the Comex silver market above a 12-year significant resistance level ($30).
Following the rise in gold prices, silver prices have followed suit and outpaced, a typical characteristic of a bull market in precious metals. Since hitting a low in February, the price of silver has risen by over 45%, significantly outperforming gold, and shares of junior silver mining companies have led the rally in gold and gold stocks.
Despite silver prices reaching multi-year highs, the arbitrage window, i.e., the price difference between China and international silver prices, has further widened. This creates an incentive for China to import more silver, potentially squeezing the supply from other countries. Daniel Ghali, Senior Commodities Strategist at TD Securities, stated that the silver import surge in China will further deplete the free float in Western countries, though market pricing has not yet reflected this.
Not only China, but another major Asian country, India, is also “frantically buying” silver. Between January and April, India imported a record 4,172 tons of silver, compared to only 455 tons in the same period last year, and a total of 3,625 tons imported throughout last year. In addition, during the first four months of this year, India’s silver imports have increased by 817% compared to the same period last year, exceeding 1.15 times the total for the whole of 2023.
Both China and India have seen a surge in silver imports due to the rapid growth of the solar energy industry. In 2023, global silver demand for photovoltaic applications hit a record high of 193.5 million ounces, with China, a major global solar panel producer, at the forefront of this growth.
A recent report from the Silver Institute shows that global silver total demand declined by 7% to 37,169 tons in 2023, with industrial demand at 20,354 tons (54.76% of total demand), still exceeding supply and marking the third consecutive year of structural shortages. Furthermore, global total silver supply in 2024 is expected to decrease by 1% year-on-year to 31,222 tons, while total demand is projected to grow by 2% to 37,918 tons, with industrial demand expected to increase by 9%, further widening the supply-demand gap.
