The Pulse: Silver is shining; Israel’s potash fears; Tungsten is tight Posted on March 18, 2013 by Robin Bromby
Pulse-Robin-BrombyA further sign that Chinese keep buying silver.
The South China Morning Post reports that China Silver Group is planning to expand ingot capacity by 60 per cent, from 250 tonnes a year to 400 tonnes. The newspaper quotes the company’s chief financial officer saying: “Silver is a special kind of commodity. There will be customers buying it as long as you can produce it.” The refiner plans to continue to increase its production capacity — to 550 tonnes in 2014, then to 650 tonnes in 2015.
As I have written before, in 2011 the Hong Kong Mercantile Exchange began trading a silver futures contract, hoping to tap into the growing demand for the metal in China. Silver demand rose by 67% in China between 2008 and 2010 (against 17% globally in that period). This should be no surprise: the white metal was the standard for currency from the time of the Ming dynasty until November 4, 1935. It was abandoned then only because, as investors sought safe havens during the Great Depression, the price of silver rose sharply and China could not control the silver price.
A paper on precious metals out from BNP Paribas in London notes that the annual silver contract trading volume on the Shanghai Gold Exchange failed in 2012 to break the 2011 record — but that was only because in April-May 2011 there was a tremendous surge in trading volume as the white metal flirted with $50/oz and then collapsed to $32/oz. BNP adds: “Since the start of 2013, high trading volumes suggest strong interest in silver in China”.
That’s the investment side. There’s also the industrial side to silver.
At the recent PDAC convention in Toronto, the Silver Institute’s executive director Michael DiRienzo said industry consumption of the metal would average 483 million ounces a year from 2012 to 2014; this is 53% up on the 313.4 million ounces a year consumed by industry between 1992 and 2001. These applications include electronics, communications, solar power, health and medicine, batteries, superconductors and computers — and then there are the jewellery and silverware markets.
Eric Sprott of Toronto-based Sprott Asset Management was earlier this month reported saying silver was the investment of this decade, replacing gold which he sees as the investment of the previous decade.
CCU Price at posting:
30.1¢ Sentiment: LT Buy Disclosure: Held
