Quick overview
- China’s silver imports reached a record high of approximately 836 tons in March, significantly exceeding the ten-year seasonal average of 306 tons.
- The surge in imports is driven by strong retail demand for silver bars and solar manufacturers preparing for the removal of export tax rebates.
- Analysts predict varying silver prices throughout the year, influenced by persistent shortages and fluctuating solar demand.
- Despite the current high import levels, it is unlikely that this trend will continue due to Beijing’s efforts to reduce solar industry overcapacity.
China’s silver imports hit a record high in March, well above the seasonal average amid the nation’s massive solar industry and retail demand. China, the world’s biggest consumer of silver, imported roughly 836 tons last month, continuing a strong run of inbound shipments this year, according to customs data.
On the other hand, over the previous ten years, the March seasonal average has been roughly 306 tons. Retail investors are buying tiny silver bars in place of pricey gold, and solar manufacturers are front-loading production in preparation for the export tax rebates’ removal on April 1.
Analyst projections vary widely due to silver’s dual role (industrial and monetary metal), volatility, and sensitivity to macro factors like the strength of the USD, interest rates, and industrial activity. China’s record imports raise bullish pressure through physical tightness, even though they are a bit of an anomaly (solar front-loading is unlikely to repeat at this scale
(JP. Morgan, LBMA/Reuters poll): The average price per ounce is between $79 and $81 for the full year. The quarterly averages for Morgan are roughly $84 (Q1), $75 (Q2), $80 (Q3), and $85 (Q4). This is based on persistent shortages as well as some moderation of solar demand due to rising prices and substitution/thrifting.
The solar industry, which is primarily based in China, uses about one-fifth of the annual supply. It is unlikely that the high rate of imports will persist, though.
Traders shipped silver as strong demand drove Chinese prices well above global benchmarks to profit from the arbitrage opportunity.
A large portion of the metal passed through Hong Kong. Non-yielding precious metals like silver and gold have seen their prices decline from their January highs amid worries about inflation caused by the Iran war’s energy crisis. Additionally, retail-driven demand, which comes after significant price momentum, has stagnated.
Beijing’s pledge to reduce overcapacity in the solar industry, which results in lower output, puts pressure on industrial use in China. Additionally, the industry may choose to replace less expensive base metals with silver due to persistently high prices.
Olumide Adesina
Financial Market Writer
Olumide Adesina is a French-born Nigerian financial writer. He tracks the financial markets with over 15 years of working experience in investment trading.