Investors and lower-middle class households in India are selling their silver. The increased scrap supply is feeding demand (lower relative to last year) and has reduced significantly the need for imports.

Last month, as per data of Ministry of Commerce & Industry, import of silver was 11.28 tonnes, down 96 per cent, y-o-y.

Year-to-date (between January and September) about 1468 tonnes of silver have been imported. In full year, 2019, a total of 5,598 tonnes of silver was imported.

 

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Scrap supplies increase

Drop in imports is because a good quantity of silver jewellery scrap and bars have been coming into the market, says Chirag Sheth, Principal Consultant - South Asia, Metals Focus.

Rishabh Singhal, Chief Marketing Officer of SB Ornaments, one of the largest bullion dealer, says about 300 tonnes of scrap silver comes to the market every month.

“Those who invested in silver bars in 2011 around ₹72,000/kg are now selling; I also see a trend of lower-middle class people and the migrant population in rural-India disposing their silver jewellery to raise cash for their day-to-day needs…”, said Singhal. He further added, “Last year around same time, the scrap supply in silver was near to nil, but now it is huge…whatever little gap is there is filled by Hindustan Zinc that provides supply of about 40-50 tonnes in a month in the domestic market.” A reason for more interest among people to sell silver is the price rally, says Chirag Thakkar, CEO of Amrapali Group Gujarat, a leading silver importer.

Silver futures in MCX hit a record high of Rs 77,949 (from Rs 46,000 levels in January) in August and now trading at Rs at Rs 61,850. “For a long-time, silver prices were muted and now that it spiralled over ₹70,000/kg, people who were waiting long for an exit are selling,” added Thakkar.

Demand is also weak for silver, add market players. Economic slowdown due to Covid-19 lockdown and job loss have eaten into the appetite for the metal.

Weak demand

“ Payal (anklet) demand is not there now…since March, silver sales has been very poor. If prices go down in the coming days (it is at discount of $1-1.5/ounce now) next few weeks, demand may pick up towards Diwali,” said a jeweller in Chennai.

The year 2020 may end with a total import of about 3,200-3,500 tonnes, say silver traders that would be 40 per cent below last year.

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