Silver Traders Seek Out China as Solar Demand Stays Strong

China's silver imports may surge in the coming weeks, fueled by a combination of strong industrial demand and a price advantage in the Chinese market, according to a report by Bloomberg.

The news comes on the heels of a strong year for silver demand. Silver Institute figures show that although overall demand fell 7 percent in 2023, it still outstripped supply, resulting in a third consecutive structural market deficit.

This trend is expected to continue in 2024, with industrial demand forecast to rise by 9 percent.

The primary driver for the expected increase in Chinese silver imports is the booming solar panel industry, a major consumer of silver. Global silver demand for photovoltaic applications skyrocketed by 64 percent in 2023, reaching a new high of 193.5 million ounces. China, a leader in solar panel production, is at the forefront of this growth.

This surge in demand has led to a decline in Chinese silver stockpiles, and to meet their needs Chinese buyers are increasingly turning to silver imports. According to Bloomberg, although there is a 13 percent import tax, the premium on the Shanghai silver spot price rose above 15 percent last week, more than compensating for the charge.

"A wave of imports into China is going to drain the free float away from the West even further," Daniel Ghali, senior commodity strategist at TD Securities (TSX:TD,NYSE:TD), told Bloomberg. "That hasn't been captured by market pricing.”

This trend could have a ripple effect in the global silver market. As China ramps up imports, available supply of the white metal for other countries could tighten, potentially pushing prices higher.

Speaking to the Investing News Network on May 24, David Morgan, publisher of the Morgan Report, commented on the potential price impact for silver if retail investors in China catch on to the trade. "If the Chinese retail market has caught on to the silver market, watch out. I mean, you've got 1.4 billion people — not all of those people are going to be silver investors, I realize. But the point is there's a lot of Chinese and they love the markets," he said during an interview.

The silver price was trading at US$31.38 per ounce as of 12:00 p.m. EDT on Thursday (May 30).

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

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.