China Plays a Major Role in Global Silver Market
Over the past two decades, China’s role in the global silver market has increased dramatically. In the 1990s, the country was a “relatively small player” in the silver market, according to a review from the consultancy Thomson Reuters GFMS commissioned by the Silver Institute.
“This year, however, following a period of robust growth, China is now the world’s second-largest silver fabricator and is likely to become the second-largest producer, with its share of global demand and supply standing at 17% and 14%, respectively,” the report release on Thursday said.
In addition, “both silver demand and supply are expected to achieve even further growth in coming years.”
Total silver demand in China grew to 170.7 million ounces in 2011 from 67.1 million in 2002. Fabrication demand grew 137% to 159.5 million.
During the same period, Chinese industrial silver fabrication climbed to 84.4 million ounces from 37.7 million. The largest slice came from the electrical and electronics sector.
A key to this development was a rapid expansion in the country’s semi-conductor sector. Similar growth across a wide range of applications also occurred, including a surge in cell phone and computer production to account for 70% and 90%, respectively, of the global total last year. Additionally, strong advances were reported in other personal electronic goods, including tablet computers, notebooks and light-emitting diode backlit televisions.
The Chinese silver jewelry market grew 211% from 2002-2011 to 54.4 million ounces, with greater exposure across the country’s interior, the report said. Further growth is expected in coming years since ongoing urbanization should lead to the expansion of retail jewelry outlets in larger cities.
Chinese silverware fabrication nearly doubled over the last decade, making China the second-largest silverware fabricator globally behind India, according to the report.
Demand from Chinese silver investors jumped in recent years, making China the world’s biggest market for both physical investment and paper trading of silver futures and other similar contracts. In 2010, during the first full year after the liberalization of the Chinese silver investment market in 2009, net demand for silver bars and coins doubled to 9.8 million ounces. In 2011, the figure climbed further to 17 million, accounting for 8% of global net purchases of silver bars and coins, the report said.
On the supply side, Chinese mine production has almost doubled over the last decade to 104.6 million ounces, according to the report. Much of this is metal that was a by-product of base-metals production. China’s mine production of silver now accounts for 14% of global supply, and it is likely to be the second-largest silver producing country in 2012.
Scrap supply has also risen steadily over the same period, as Chinese industrial fabrication has grown rapidly, lifting supply from this segment to 31.9 million ounces last year.
A notable increase in government sales from China was an important feature of the silver market from 1999 to 2003, the report said. Thereafter, sales from Chinese official and quasi-official stocks fell markedly, and the country has been essentially absent from the market since 2006.
“This report underscores China’s growing importance to the global silver market,” said Michael DiRienzo, executive director of the Silver Institute. “It is impressive to see the dramatic development in so many sectors of their domestic silver market in the last decade.”
The full report is available at the Silver Institute’s web site at http://www.silverinstitute.org/site/wp-content/uploads/2012/12/ChineseSilverMarket2012.pdf.
