Chinese silver stocks are on the rise

China's silver inventories have risen sharply this year due to relatively weak domestic demand, according to the report Bloomberg. According to the Shanghai Futures Exchange , there was a supply of 341.5 metric tonnes of silver on April 9, the highest level in a year. In the last week of 2014, the silver stock in China was still only 122.8 tonnes. Silver has also been piling up on the Shanghai Gold Exchange in recent months. On 3 April, a stock of 263.97 tonnes was stored there, double the number a year earlier.

The growth in the supply of silver has to do with a relatively weak demand from the market. The Chinese economy showed relatively weak growth in the first quarter of this year, suggesting that there was also less silver used by industry. The gray precious metal is widely used in electronics, batteries, and solar panels, among other things, as it is a very good conductor.

Not only did the industry need less silver, jewellers also bought less of the precious metal. "The demand for silver jewellery has been relatively weak in recent months", said precious metals analyst  Jin Xiangyun of Beijing Antaike Information Development Co. "Producers normally buy a lot of fine silver after the Chinese New Year, but that didn't happen this year."

Silver Market

Half of the world's supply of silver is used for industrial applications, while gold is about ten percent. As a result, silver is much more sensitive to fluctuations in the business cycle. If the economy takes a turn for the worse, part of the industrial demand will disappear. In the case of silver, this quickly involves large volumes, as evidenced by the growth of silver stocks in China.

Global demand for silver has been growing for years in a row, reaching 2013, according to the Silver Institute a record level of 1.08 billion troy ounces. While the total demand for silver over the past decade has shown an upward trend, the percentage used for industrial applications is decreasing. This decline is offset by an explosive increase in the demand for Silver Coins and Silver bars. Over the past nine years, the demand for silver in the form of a physical investment object has risen from 53 to 245.6 million troy ounces.  

The Silver Price is at €485 per kilogram at the time of writing. That's almost three times as much as the €175 paid for it ten years ago, but it's also half the record price reached in the spring of 2011.

Silver inventories in China are increasing