3 Reasons Indian Silver Imports Could Fall in 2014

2013 was a bad year for silver, but a good year for silver in India — the nation broke its 2008 silver import record of 5,048 metric tons (MT), bringing in 5,478 MT of the white metal. 

However, while that gain is impressive, word is that India will not be able to sustain it in 2014.

There are three main reasons for that outlook, a recent Reuters article explains. The first of those is price. Silver was attractive to Indian buyers last year in part because it was cheap; it thus stands to reason that it is becoming a less attractive purchase now that it’s becoming more expensive.

Interestingly, it’s not only individual buyers who are being deterred by silver’s higher price. Mineweb quotes France’s Societe Generale (EPA:GLE) as saying in a research report that silver demand, particularly from “the notoriously price sensitive jewellery and silverware segments,” is already on the decline.

The second reason is that India seems poised to lower its gold import duty, which it “hiked … to a record 10 percent last year” in an effort to “curb a ballooning trade deficit.” The higher import duty pushed a large number of yellow metal enthusiasts over to silver, but that doesn’t mean they won’t come rushing back to gold when it becomes more affordable. In fact, Reuters notes that industry experts believe that “[a]ny easing of curbs on gold imports could remove about 2,000 tonnes of demand for silver from investors as an alternative asset.”

Indian Finance Minister P. Chidambaram is expected to review the duty by mid-March.

Finally, Reuters identifies an upcoming Indian election, expected in May, as an event that is likely to direct money away from silver. That’s because much of the candidates’ spending money is expected to come from “illegal or ‘black money,’ which may otherwise have been invested in gold or silver.”

Taking those three factors into account, it seems fairly likely that India’s silver imports will indeed be lower this year. As yet, however, there’s been no word on exactly how low they are expected to fall.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

Related reading: 

Will Indian Silver Imports Reach a Record in 2013?

Survey: Will India’s Silver Market Takeover Push Prices Up?