Sophia is looking great Ray..How old is she?
Looks like they tried to hold silver in check today, despite gold trading at 17 year highs..Funny thing silver, is it precious or base material<g>..fills the ticket on both counts..(haven't nibbled on uspix yet, but watching..
Is China a spent force in the Silver Market?
By: Rhona O'Connell
Posted: '15-SEP-05 12:19' GMT © Mineweb 1997-2004
LONDON (Mineweb.com) -- Is China a spent force in the silver market?
This was one of the questions posed at the GFMS seminar in London on September 14th. Tim Spencer, the company’s Australian analyst (who, probably still smarting from Australia’s loss of the ashes, had the grace to ask us Brits to treat him gently) presented on the state of the Chinese silver industry and its impact on the rest of the market.
Based on GFMS’s on-the-ground research, Mr. Spencer reported that China was currently responsible for 6% of the world’s silver demand and 12% of its supply – levels that are expected to increase over the next few years as the country continues with its industrial expansion. Demand could well account for approaching 10% of total during this year.
The most interesting area of Chinese influence in the silver market of late has been the level of government sales into the market. Many years ago the yuan was minted from silver and, since demonetisations, the Chinese government has had hefty silver stockpiles (the same also applies to India – for rugby lovers, it may be of interest that the Calcutta Cup, played for annually between England and Scotland, is so-called because it was cast in Calcutta from melted rupees). Over and above the long-standing stockpiles however, GFMS estimates that government stocks were built further during the 1990s, and peaked in 1997. During 1998 some of this silver, rather than being sold off, was shifted to other locations and from 1999 onwards, stocks have been sold down. Sales in 1999 were the largest to date, at almost 2,600 tonnes. To put this into context, global silver demand last year was just over 26,000 tonnes.
Inventories have dropped by an estimated 10,000 tonnes over the past seven years and GFMS doubts that they were much over two to four thousand tonnes by the end of 2004. All other things being equal, stocks would be depleted in perhaps four years’ time. Even this is doubtful as the government, both for economic and strategic reasons, is unlikely to want to run stocks towards zero. This would certainly underpin the fact that, despite comparative price strength, Chinese sales this year have been low (and this of itself has, of course, helped the price).
Consequently, Chinese inventory sales are not the force that they were and are unlikely to become so again in the foreseeable future. Everything else, however, is rather different.
At an industrial level, fabrication demand is expected to rise strongly. Local demand currently accounts for roughly 80% of local mine production, but by the end of the year the country is likely to be a net importer as mine and scrap are unlikely to keep pace with demand. Scrap levels will obviously increase as demand rises, but there is an inevitable time lag. One of the key features here is international involvement; electrical and electronics fabrication, and jewellery manufacture, are growing rapidly not just because of the local economy but also because a number of international manufacturers are setting up shop in China and using local fabricators.
This year China has overtaken Thailand as the largest exporter of jewellery into the United States (and Thailand itself overtook Italy as the leading supplier in 1999). Domestic industrial demand is also growing apace. This year Samsung, for example, has targeted China to be its second largest customer behind Korea.
Domestic demand is expected to become increasingly important, especially contemporary jewellery sales into the younger generation.. Local demand for electrical and electronics is also expected to overtake exports. Industrial offtake in general, however, may slow because of the recent speed of industrial growth and the government’s attempts to engineer a soft landing. The photographic market, as is the case everywhere, is under question as a result of the mushrooming digital market.
Local mine production is difficult to track because of its discrete nature and inconsistent record keeping. GFMS estimates that it was probably in the region of 500 tones in the early 1980s; it had reached 1,494 tonnes by 1999 and 1985 tonnes in 2004. There is good potential for expansion and the group expects production to grow at a “high single digit rate” over the next decade. Exports of mined metal have been growing as a result not only of increasing local production but also the treatment of imported concentrates. Between 1999 and 2003, imports of copper, lead and inc concentrates increased by 115%, 300% and 1,596% respectively ; GFMS estimates that silver contained in these concentrates has risen from 250 tonnes in 1999 to 1,095 tonnes in 2004.
So; Chinese government sales are likely to dry up, which is probably why some observers have been thinking of China as a spent force in the silver market. As with so many other commodities, however, China’s participation in both primary and secondary supply and fabrication demand is growing rapidly and far from being a spent force, it is an increasing vibrant one. |
