China Silver Stockpiles Surge as Demand Wanes on Slowing Economy

Beijing-China (Apr 17)  Silver stockpiles in China surged this year as the country’s slowing economic growth weakened demand for the precious metal, according to a state researcher.

Inventory monitored by the Shanghai Futures Exchange almost tripled to 341.5 metric tons April 9, the highest in a year, from 122.8 tons in the final week of 2014, according to weekly bourse data compiled by Bloomberg. Stockpiles on the Shanghai Gold Exchange also more than doubled this year to 263.97 tons on April 3, exchange data show.

Chinese silver producers delivered the metal to exchange warehouses amid falling physical demand, said Jin Xiangyun, a senior precious metals analyst at Beijing Antaike Information Development Co. China’s economy expanded at the weakest pace since 2009 last quarter, indicating a deepening slowdown. The global benchmark price has fallen 17 percent in the past year.

“Silverware and jewelry makers said they wouldn’t produce much because of weak demand,” Jin said in a telephone interview April 22, citing their recent survey of producers. “Fabricators usually purchase large amounts of refined silver after Chinese New Year holidays. That didn’t happen for this year.” The break was from April 18-24 this year.

China’s gross domestic product rose 7 percent in the first quarter, while industrial production was weaker than estimated in a Bloomberg survey. About 50 percent of silver is used in industry to make everything from solar panels to batteries, compared with 10 percent for gold, data from the Silver Institute and the World Gold Council show.

Silver for immediate delivery fell 0.2 percent to $16.2694 an ounce by 10:31 a.m. Shanghai time. Futures for June delivery on the SHFE lost 0.8 percent to 3,524 yuan a kilogram, down 13 percent in the past 12 months.

SHFE stockpiles fell to a two-year low in September as exporters stepped up overseas shipments to qualify for a tax rebate, draining inventory.

Tightened scrutiny by Chinese customs authorities since late last year probably helped close the loophole, contributing to the surge in local stockpiles, said Chen Min, a Shenzhen-based analyst in Jinrui Futures Co.

Source: Bloomberg