China’s Major Role in Silver Explained - Silver Investing News

China’s Major Role in Silver Explained
Tuesday December 18, 2012, 4:15am PST
By Michelle Smith - Exclusive to Silver Investing News



The structure of the silver industry in China is almost unrecognizable from the situation 20 years ago, a new report from Thomson Reuters GFMS states. In 1990, China was a relatively small player in silver. Now, the nation is responsible for 17 percent of global demand and produces 14 percent of the world’s silver. GFMS’ latest research reveals that China’s expanding role in the silver market has been driven by the liberalization of its silver industry and over a decade of economic growth.

After the revolution in 1949, gold and silver mining did not feature in the People’s Republic’s economic planning, GFMS explains. Investment in the industry was limited and private trading and personal ownership of the metals was forbidden.
China’s low level of silver production in the early 1980s raised concerns among State Council members, who decided that local production needed to expand in order to support industrialization and move the country toward self-sufficiency.

In 1983, regulations that covered the various aspects of the silver and gold industries, from production to export, were rolled out. The People’s Bank of China (PBOC) was granted monopolistic authority to set prices and buy and sell silver.

That initiated the rise of China’s silver production, which resulted in China becoming a surplus producer by the end of the 1980s. Production surpluses continued in the 1990s, and by 1997, the PBOC realized state stocks were more than sufficient for China’s fabrication needs.

Authorities eventually came to see silver as a metal with which to test deregulation. Exploratory sales from state stocks began in 1998. In 2000, an official trading platform was designated and China’s monopoly on silver ended.

China’s silver supply

China is now the third-largest producer of silver after Peru and Mexico.

GFMS estimates that from 1998 to 2006, government stock sales totaled almost 350 million ounces (m/oz), more than 4 percent of global silver supply during that period. However, the firm confidently assumes that the PBOC has stopped selling silver as its stock levels are no longer “excessive.” Its remaining silver will play a role in diversifying China’s reserve portfolio away from US dollars, the firm notes.

Still, total supply has grown from 94.2 m/oz in 2002 to 281.5 m/oz in 2011, the firm reports.

This growth was largely the result of China’s decade-long GDP growth, which drove industrial development by averaging 10 percent annually. Rising commodity prices also accelerated exploration and development.

Mine production more than doubled during this time, increasing from 52.9 m/oz in 2002 to 104.6 m/oz in 2011. That growth is incidental as it was mostly due to China’s need to supply fabricators with base metals, GFMS explains. The volume of primary silver production in China is limited. 95 percent of its domestically mined silver originates as a by-product, mostly from lead-zinc deposits.

Despite this rapid supply growth, China experienced its first silver market deficit in 2002; that deficit grew to 23 m/oz in 2011. This gap has been filled in large part by hefty increases of imported base metal concentrates.

According to GFMS, since 2007, the largest source of silver supply in China has been base metals containing silver. Supply from that source increased from a mere 20.4 m/oz in 2002 to a peak of 150.3 m/oz in 2008.

China’s silver demand

GFMS states that China’s fabrication demand has grown about 12 percent per year from 2000 to 2011, representing a rise in offtake from 48.7 m/oz to 159.5 m/oz.

That is in stark contrast to the rest of the world, where fabrication demand has posted a double-digit fall over the same period, the report notes.

If China’s fabrication demand is viewed in segments, industrial demand is the largest slice. Within that segment, electrical and electronic applications represent the largest slice. Over the past decade, China has also become the world’s largest silver jewelry fabricator.

Growth in China’s investment demand is another notable development. With the liberalization of the market, Chinese investors’ participation has grown, elevating the nation from being “a marginal player just a few years ago … [to] the world’s leading market for both physical investment and paper trading” today.

An explosion in local precious metals purchases has been driven by macroeconomic conditions in China and abroad, states GFMS. For example, the firm explains that Chinese households have a great deal of cash savings that need to find a home. Yet the property market has been volatile and is now more heavily regulated, the stock market has seen heavy losses and interest rates on savings are close to zero in real terms.

Investment has traditionally been dominated by coins as silver bars were only made available in mid-2009. Last year, China accounted for 8 percent of global net purchases of these products.

Interest has also grown in silver contracts. The launch of silver contracts on the Shanghai Futures Exchange (SHFE) in May means that three exchanges now offer silver paper trading. GFMS notes that the SHFE has become an important commodity exchange for silver futures trading on a global basis, ranked only after the COMEX.

China silver outlook

As long as the outlook for economic growth in China remains positive, the nation is expected to continue playing a major role in the silver market.

Its use and production of base metals are slated for growth, which should result in an increase of by-product silver supply. GFMS also forecasts strong increases in production from primary sources as new projects are realized.

Growth in paper trading could be dramatic, the firm states. Further growth in coin and bar demand in upcoming years is expected as people place their trust in precious metals as a store of value and inflation hedge, notes the firm.

Urbanization and rising incomes also paint a bright picture for silver in China. As GFMS points out, the urban population only exceeded 50 percent in China for the first time last year. That compares to 80 percent in the countries that make up the Organisation for Economic Co-operation and Development and presents a bullish case for demand growth for silver-bearing products.

POSEIDON CONCEPTS CORP (PSN.TO)

Jag läste nyss Original Brailas blogginlägg om Poseidon "En fallande kniv för den spekulativt lagde"

Min idé att lägga årets 12000 på IPS-depå i Gold One ändrades därmed till att bli Poseidon då jag såg att kursen på kort tid backat från ca 15 cad och utdelningen till nuvarande kurs är häpnadsväckande 30%, på 0.09 cad/månad yield.

 

Så det blev ca 500 Poseidon ikväll på 3.23 cad

Aurcana PR om komersiell produktion vid Shafter igår fredag 14/12

Se Scoris blogg för kommentarer

David Pescod om COLOSSUS MINERALS

COLOSSUS MINERALS (T-CSI) $4.13 +0.13
Not that anyone cares about resource stocks these days (they don’t pay dividends do they?) but Colossus Min- erals is a company with its super-rich Serra Pelada gold/ platinum/palladium mine that should be up and running within the next six months in Brazil. I say should be up and running by then because it certainly looks like they’ve got a lot of things already built and they are starting to take a bunch of analysts down to see it first hand.
We had hoped to go mid-January, but there is a wee bit of a trick to going to Brazil...you need visas and part of getting that visa means that you could be kissing your passport away for up to a month while it is sent to Brazil- ian authorities who examine the passport and then issue the visa after a rather significant payment. (If you are thinking of going to Rio’s Olympics or World Cup, make sure to get those visas!)
Seeing as we were in the ‘sick bay’ the last while, it looks like we won’t be going, but I suspect it is going to be an interesting tour for the analysts and observers that do get on board.
Today though, it’s big news is there’s some significant changes in management as Colossus announces that “David Anthony has been appointed President and COO. He is a mining engineer with more than 30 years of experi- ence in the business including nine years with Barrick Gold where he was responsible for the development of Bulyanhulu, Buzwagi and Tulawaka mines.”
Also significantly, Luis Albano Tondo has been ap- pointed VP Operations and Country Manager. In mining these days it is important to make sure that the locals are happy with what you are doing.
Meanwhile we look at a long list of analysts that love the story as Clarus Securities has a $12.50 Spec Buy; GMP Securities has an $11.50 Buy; RBC Capital Markets has an $8.00 Outperform target; Macquarie Securities has a $7.75 Outperform target and Dundee Securities has a $7.70 target. But no one seems to care...yet! Hey it is the resource sector no matter how rich this play might be.
Meanwhile Nicholas Campbell at Canaccord has an $11.00 target which he gets to by stating, “We continue to value the shares of Colossus based on a 0.75x multiple to our peak gold price estimate of NAVPS (7.5%,US$2000/oz Au) of C$14.51, which gives us a target price of C$11.00, unchanged.”

Väntan på Aurcana

Fortsätter pendla kring 1 CAD i en svag råvarumarknad och i väntan på PR om kommersiell produktion i Shafter-gruvan.

Q4 2012 är uppgett, senaste PR innehålle två nyrekryteringar, LN och Shafter, som visar hur man satsar hårt på båda gruvorna.

Bubbelvarning av BIS

Bloggare som tar upp att Centralbankernas Centralbank, BIS som varnat före kraschen 2008 nu varnar igen.

http://www.washingtonsblog.com/2012/12/worlds-most-prestigious-financial-agency-called-the-central-banks-central-bank-warns-of-bursting-bubble.html

Gammal PR från Endavour som visar potentialen i bolaget

VANCOUVER , Nov. 14, 2012 /CNW/ - Endeavour Mining Corporation ("Endeavour" or the "Corporation") (TSX:EDV, ASX:EVR, OTCQX:EDVMF) announces strong financial and operational results for the third quarter of 2012, including operating cash flow from Youga and Nzema mine operations of $40.7 million and production of 49,468 ounces of gold. The third quarter results do not include results from the Tabakoto mine, acquired via the Avion transaction subsequent to quarter end.
Neil Woodyer, CEO, stated
"Our Nzema and Youga mines have delivered another strong quarter of production and cash flow, with our 9 month production totaling over 152,000 ounces and generating $121 million of operating cash flow. Now that we have completed the Avion acquisition and added a third mine, Tabakoto, our full year 2012 gold production is expected to be approximately 300,000 ounces and our growth pipeline has expanded. We plan to complete the Tabakoto mill expansion during the first half of 2013, which is expected to increase Tabakoto gold production to approximately 150,000 ounces per year. In addition, Agbaou has achieved its first construction milestone as concrete pouring began this month. The Agbaou mine is on schedule to contribute an additional 100,000 ounces per year from early 2014."