RESEARCH AND ANALYSIS
If you mention China, most people think of gold. However, China is also a big consumer of silver, net importing between 5% to 10% of global annual supply of 30,000 tonnes. A recent note by David Jollie of Mitsui Global Precious Metals focusing on the Chinese silver market concludes that it will provide support to the silver price in the short to medium term.
While net imports of refined silver into China peaked in 2010 at 3,475 tonnes, David's analysis of other public and in-house data shows that China's total silver demand actually peaked at 6,270 tonnes in 2013, with 2014's figures only declining by 1.9%. For 2015, he expects imports of silver to rise sharply on the back of stable local mine production, low exchange stocks and 7% GDP growth driving positive growth in the solar, automotive and electronics sectors.
In addition, David believes that investor interest in silver that drove the price to its highs in 2011 has mostly been eliminated, based on an intriguing comparative analysis of silver and indium (which share similar mining and end-use market structures).
This means "that there is scope for silver to regain some of its [investor] premium. If gold rallies further, international investors can be expected to send silver higher". Furthermore, David thinks that commodity financing deals using silver will return, resulting in further demand for silver out of China.
