China Silver Production Growth May Stall Next Year
Refined silver output in China, the world’s third biggest producer, has peaked and may stop growing as producers halt expansion because of higher costs, lower prices and reduced incentives, an industry official said.
Rising costs of labor and higher taxes on exports have reduced producers’ margins, Zhou Juqiu, chairman of the gold and silver division at the China Non-ferrous Metals Industry Association, said in an interview. Output may rise to nearly 10,000 metric tons this year from 9,092 tons in 2007, he said.
Spot silver prices have more than halved from a record in March after hedge funds and speculative investors sold commodities to raise cash, while recession fears reduced demand for industrial use of the precious metal. China’s annual silver output growth already slowed to 10 percent last year compared with an average 30 percent between 2001 and 2006, Zhou said.
“There won’t be much growth going forward” in the next few months, Zhou said. While producers are still “doing ok,” they are faced with an increasingly difficult environment, including tighter financing and reduced export market, he said.
China in July revoked the export rebates on silver to control use of limited natural resources. The association is lobbying the government to return the incentive to help struggling producers, Zhou said.”But nothing has come out of it.”
The country will increasingly rely on imports to fill the needs for the precious metal, he said. Last year, the country’s net imports of silver were 1,067 tons, compared with net exports of 1,085 tons in 2006, according to customs data provided by Zhou.
‘Big Potential’
“China has the world’s biggest potential for silver consumption,” said Li Xiaoni, vice president of China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters. The country’s consumption already accounts for 70 percent of the global total for industrial use, she said.
China’s consumption of silver has grown by over 10 percent in “recent years,” reaching 4,000 tons last year, Zhou said.
China has 26,000 tons of silver reserves, about 9.6 percent of the global total, and the fifth biggest in the world, he said. About 60 percent to 70 percent of China’s silver is the byproduct of smelting for lead, zinc and copper, he said.
Silver for immediate delivery was up 1.8 percent at $10.17 an ounce at 3:22 p.m. in Shanghai after falling 3.3 percent yesterday.
Tags: export, exports, import, imports