Silver imports fall as investors sell hoards

  • 29-Apr-2019
  • Silver imports fall as investors sell hoards

Having amassed silver in 2018, it is time to sell them off now. After a 36 per cent rise in 2018, silver imports fell 10 per cent in the March quarter as investors went on to liquidate their holdings once the price of the metal rose.

Silver imports had increased 36 per cent year-on-year to 6,958 tonnes in 2018 — the second highest imports after 2015. Silver production too went up 32 per cent, from 545 tonnes to 722 tonnes, as Hindustan Zinc's output touched a record high of 610 tonnes due to increased mining activity and better silver grades.

A large part of the increased supply went towards meeting the investment demand that rose exponentially in 2018 by 115 per cent year-on-year to 2,183 tonnes.  Investment demand accounted for 29 per cent of total supply.

 Physical bar investment moved up by 160 per cent to 1,848 tonnes. Vaulted silver stocks increased by 20 per cent to 610 tonnes last year. Silver jewellery fabrication rose 16 per cent to 2,378 tonnes in 2018 with a large share getting added in Q4. This was driven by the diversion in the price movement of gold and silver, with the former rising by 6.8 per cent and the latter falling by 3.3 per cent quarter-on-quarter in Q4.

"Investors piled up silver to take advantage of the price drop, with the average silver price being Rs 37,498 per kg in the second half of the year. It was 4 per cent lower than the level recorded in the first half. Short-term hoarding by traders and jewellers was rampant when prices retreated,” said Debajit Saha, Senior Analyst, Precious Metals Demand, South Asia and UAE, GFMS Thomson Reuters.

Volumes of the benchmark silver contract traded at the Multi Commodity Exchange too increased by 6 per cent to 166,651 tonnes in 2018. Investors were trying to leverage the price difference on the MCX and spot market. Total volumes delivered to the exchange increased by a whopping 93 per cent year-on-year to 226 tonnes.

"While MCX follow the global trend, the spot prices are determined by the forex rates, import duties and the demand in the market and this provided an opportunity of price arbitrage," said Saha.

Investors indeed got an opportunity to in the first quarter of 2019 when silver prices went up towards Rs 43,700 per kg. This saw considerable selling of the hoarded stocks. This, in turn, led to a decline in the import of silver in the March quarter. At 1,084 tonnes, the Q1 imports were 10 per cent lower than 1,199 tonnes in the same quarter last year, as per the provisional data from Ministry of Commerce.

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