Silver imports expected to be 7% lower this year

Silver imports this financial year are expected to be lower by nearly seven per cent, as there is no fresh demand on high and volatile prices. Increasing domestic production is also affecting imports.

“This financial year, India is expected to import close to 1,600 tonnes. Last year, silver imports stood at 1,718 tonnes,” said an industry observer.

This April, silver had reached an all-time high of Rs 75,020 per kg in the domestic market. Globally, it crossed an all-time high of $50 an ounce. Still, year-on-year silver has given better returns, with domestic silver up 11.6 per cent in 2011, compared with 71.5 per cent returns in 2010. However, from an all-time high, silver is down nearly 30 per cent and the movements have been volatile.

 

Volatility in price movements and comparatively higher prices due to lower rupee value has kept investors away from buying more silver, resulting in lower imports.

Last year, silver investment demand was lower, estimated by Thomson Reuters GFMS at 900 tonnes, mainly due to the significant increase in the rupee silver price. “There has been strong investment demand for silver this year and the annual figure is estimated to be considerably up year-on-year,” says Gargi Shah, metal analyst at Thomson Reuters GFMS. The main reason behind higher investment demand has been the bullish investor sentiment towards the white metal earlier this year. Silver has given higher returns compared to gold in the past, Shah added. Thomson Reuters GFMS has said silver investment demand in India was at a record of 3,200 tonnes in 2008.

Traders expect imports to go up significantly in 2012 if prices correct and trade in the Rs 40,000 per kg range.

Hindustan Zinc, a Vedanta group company, is the largest producer of silver in the country and the company is aiming to produce 500 tonnes by the next financial year. It’s production touched 180 tonnes in 2010-11. In 2011-12 ,it is estimated to be higher.

The company, earlier this month, commissioned a 350 tonne per annum silver refinery in Uttarakhand. To meet its requirements, the volume ramp-up would be driven from the Sindesar Khurd Mine and improvement of recovery done at other mines and smelters. As the company’s domestic silver production improves significantly, it will impact the import and re-cycled silver market in India, a spokesperson said.

Since Hindustan Zinc sells silver at the London Bullion Market Association rate, this will also have an effect on imports in the following year.

On the price front, downside remains limited, according to Praveen Kumar, chairman of Maya Global, a Dubai-based commodity broking firm. “Silver fundamentals are much stronger than gold and the return on investment in silver would be much better compared to gold. The price range for silver would be between $27 and $31, if the global economy doesn’t recover in the short term.”