the chinese silver market 2012

7/30/2019 The Chinese Silver Market 2012

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Disclaimer

Wh ot h b d to th o th oto th dot, th ott o th dot

podd wthot gt, odto o wt to t , opt o bt. it ot to b

otd otto o o to b o po t, td podt, oodt, t o td

tt. To th xtt pttd b w, w, oth b o o gop o op d thd pt

otd to hb xp xd:

a odto, wt d oth t whh ght othw b pd b ttt, oo w o th w o qt.

a bt o dt, dt o oqt o o dg d b po o ogzto dg o g

o th dot dg (wthot tto) o o o o , o o b, o o pot o ott, o

o tptd g, o o goodw d whth d b tot (dg gg), bh o ott o othw,

ob.

B otg to d th dot, o g to th bo t d odto th tt.

TablE of ConTEnTs

1. itodto d ext s 3

itodto 3 mkt stt 3 mkt Otook 4

2. Dgto d Hto rw o th ch mkt 5

Hto Bkgod 5 ro 1979-1999 5 lbzto 2000-2012 6

3. s spp ch 8

itodto 8 m Podto 8 mg Otook 10

Podto o cott d rd 11 sp 14

Got stok s 15

4. s Fbto Dd ch 16 itodto 16 idt appto 16 Photogph 19

Jw 20 sw 21

5. s itt Dd ch 22

rt itt 22 coodt exhg 23

6. s ipot d expot 24

Bo ipot d expot 24 s-td d idt s shpt 25

Fo Box s O ch 10


3/26

3

The Chinese markeT - DeCember 2012

1. inTroduCTion and ExECuTivE summary

INtRODuCtION

Th t two dd h wtd b o

gt hg th ch kt. lookg

bk to 1990, t to tht th ot w o

t p th gob kt. Th

, how, oowg pod o obt gowth, ch

ow th wod od gt bto d

k to bo th od gt pod, wth t

h o gob dd d pp tdg t 17% d

14% pt. moo, tkg to ot ch

g pot o th o o b t

ott d, o th dd d, -td

podt, t tht ch h pd g

pott o th gob kt.

agt th bkdop, th s ittt h

ood Thoo rt GFms ot o to pod

oph w o th ch kt, bt

o to x th o to (h gto

hg d th bod oo bkdop) tht h

fd th pd xpo th ot

kt. i ddto, th pot dd th otook

t o th dopt tht ght o wth th

ot o th hot to d t.

it hod b otd tht, wh w h b odtg

h ch o od 20 , zg

pp d dd h g pod to b

hgg, pt b o wht hgh gtd

dt. mwh, tx t (o, t t,

dt) h o todd o tt

g kt z. a t, o ttt

tg to pp hod b wd wth to,

th xt th pott o dob-otg,

w pott k dtg th o o tp o

pp, oth wod whth t t to

podto, p o od o potd

b t ott. Wh t o to bto

dd, th pt h o b optd b th

t tht poto o d dot h b

od o potd tdt podt, whh

tho dtd to th ot o og (g GFms

thodoog o g bto dd t th

ot ). i ddto, good pt o th potd

-btd podt h ow t p. Tkg

h dt t tho d to oo

pt o th kt. a h, thogh w odt

to th o o o dt, w wod d

od tht th pt o th opx d d

kt tht t d po.

MaRket stRuCtuRe

Th tt o th dt ch, t th t

o wtg, ot ogzb o th tto 20

go. Fo 1990 to 2001, th ch kt

wtd o zb dg p,

pp o o podto d p ootb

xdd bto dd. s 2002, how, th

pt hgd dt, wth kt dt t

ppg tht d th gowg to 23.0 moz (715

t) t . O th pod, th gp w p d

b ht potd bg b t

ott og wth odt o o bo

pot.

Th ht th 2000 w t d b th

bzto o th ch kt, whh ttd

2000 ( dtd do o kt dgto

ch d t pt o th dt podd

chpt 2). ao o pot thogh h b obt

ch oo, wth GDP gowg t tggg

10% p btw 2000 d 2011. it hod b

td tht th tgth o th ch oo o

th pod h b pt hpd b boo th

tg to og wth h tt

tt d bdg otto, both o whh

h bootd dd o dt t. moo,

hp dot opto d dpob

o h o td jo dd o

o podt. Th h t hpd to t

gowth th tg to ch, p

t wh th ot xpot to h b ht

b gob oo dowt.

lookg t pp d dd ch o

dt, ch podto h b o

td g td, o th dobg o th t

dd o o. c to th h b pd dopt

th ot b t g to, whh t

h d to hp podd b-podt.

i ott, th gowth p h b

o td, wth pp o th o otg

o 6% o th ot podto t .

spg, wh dot otpt xpdd pd o

th t dd, th g gt o o pp

to th ch kt 2007 h o o

od o potd b t ott. a

dd bo, th ft th a gt

gowg pptt o w t. ewh, p

pp h o odd otb o th pt

dd, bt o t ow b.


4/26

4

The Chinese silver markeT - DeCember 2012

Tg to dd, ch dt bto

h jod ot tptd pod o gowth

o 2000-11, gg 11% p , hpd b

obto o to h pot oo

bkdop d th oto o tg pt

o t oo to ch wh podto ot

kd ow. Th ot pd oo gowth d

otd dpob o h o pd

o dto pdg, wth jw d

w bg otb b.

ch tt kt o h dgo

odb dopt, t tdg t

b b to th g pb o th shgh

God exhg 2006 (d o th shgh Ft

exhg th ). i 2009, oth k hg w

d b th Pop Bk o ch (PBOc), whh owd

pt to to b bo b ch. Th

hg, og wth p p po

d gowg d o th pb to d th t

d gowg fto p, h dd o

both ph d pp podt pt

t .

MaRket OutLOOk

i pt o pd dopt th ch

kt, both dd d pp xptd to

h th gowth og .

sttg wth podto, w o dot

otpt ot g o th xt op o . Th

gowth pd o tog pojt pp o

p , opd wth ogog g

podd b-podt o b t d god g.

G w b th gtd b gt dg o

ozto d oodto o th ch

g dt. it o ot tht thogh th b

t to w ot to xpd ch, th ogog

odzto, d tog tt otto

pt, w o kp ch pot o w t

t td o pod o t. s od

o potd ott tho k to

t otb hgh . ad o gowth otpt,

p pp t to pot hth g, g thk to

ob tx t, tght ot gto

d tog p po.

Tg to th dd d o th qto,

bto t to o ot to th og

, wth photogph dd th o to pot

o. Th tgth o dt dd w th

k d bhd th gowth, hf th t o tb

dot oo d o th xpot to.

Wh g tg ot d to hp

owdow oho oto, th hod b bod

ot b g ot d b dot -

t to o to hgh -ddd gt,

whh h b o og dotd b dopd ot.

Pot xp o w gowth h d

b ftd dot podto o

powd th t op o , t o

gt pot thoog. mwh,

g tb oo bkdop, ch k to

t t dg p jw bto, dd b th

gowg popt o wht jw og th oth

dogph, g pooto o bdd jw d

xpo o jw hop.

lt, ch t tt dd o o

ot to gow obt o th hot to d t,

wd popto b g to b d

o. Gowth pp tdg o od t ot to

b o dt, wd d t ow

qto ot opd to god hod pod tog

boot to to tt.

cHinese silver suPPly cHinese silver DemanD

0

50

100

150

200

250

300

20102008200620042002

Millionounces

Source: Thomson Reuters GFMS

Bullion Imports

Scrap Supply

From Imported

Concentrates

Mine Production

0

50

100

150

200

20102008200620042002

Millionounces


Physical Bar Investment

Coins & Medals

Industrial Applications

Jewelry

Silverware

Photography


5/26

5


2. Deregulation anD historical review of the

chinese silver market

Historical background

Cias associatio wit sier is a og oe, wit te

cotrs moetar sstem or cetries based o a sier

stadard (goig o te stadard i 1935). Foowig te

reotio i 1949, sier took sometig o a back seat

rom te perspectie o ocia poic. From 1949 to 1982,

priate idiidas i te ew Peopes Repbic were

orbidde to ow god ad sier ad te Moopoistic

Prcase ad Maagemet sstem or god ad sier was

impemeted. Te mai aim o tis sstem was to proibit

a otfows o god ad sier rom te cotr ad to

ecorage deposits o god ad sier or te ew Remibi

crrec at a set rate. Frtermore, priate tradig o

god ad sier ad priate tradig was orbidde; god

ad sier oramets cod ot be sod priate. God

ad sier miig did ot eatre i te ecoomic paig

process ad iestmet i te idstr was er imited.

reforms 1979-1999

As te Ciese ecoom etered a ew pase i 1979

wit Deg Xiaopigs Ope Door Poic, tis ew poic

aso igigted te probems o imbaaces betwee te

spp ad demad o bot god ad sier. It is certai

tre tat, drig te ate 1970s ad ear 1980s, Cia

was ot a arge prodcer o sier. Tis was a case or

cosiderabe cocer i te State Coci at te time,

wic te decided tat i order to spport Cias

idstriaizatio ad to moe towards se-sciec, oca

prodctio eeded to be expaded.

I Je 1983, te State Coci reeased te Regatios

o te Peopes Repbic o Cia o te cotro o god

ad sier, wic regated te prodctio, prcasig,

distribtig, maactrig, sig, reccig, import

ad export o god ad sier, wit te PBOC gie soe

resposibiit or settig prices ad big ad seig

sier. Faorabe poicies were aso istitted to ecorage

exporatio ad deeopmet, ad as a rest ma

primar sier resorces were idetied ad seera ew

mies were deeoped.

As a rest o tese measres, prodctio icreased rapid

trog te 1980s. A mber o arge primar sier mies

were brogt o stream, sier ric base metas operatios

were deeoped ad smeter ad reig capacit was

pgraded to aciitate eciet extractio. It is or iew

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Supply

Mie Prodctio 52.9 58.8 63.2 67.6 75.9 79.3 84.8 86.8 94.6 104.6

From Imported Cocetrates 20.4 30.8 52.1 68.3 70.4 131.7 150.3 146.2 147.2 136.9

Od Sier Scrap 11.8 13.1 15.2 17.5 20.4 22.5 22.7 25.3 29.2 31.9

Bio Imports 9.0 14.7 12.2 17.6 30.0 22.6 14.3 22.1 13.0 8.1

Total Supply 94.2 117.3 142.8 171.0 196.7 256.1 272.1 280.4 284.1 281.5

Demad

Fabricatio

Idstria Appicatios 37.7 42.6 47.2 52.9 58.2 67.5 78.0 73.1 84.4 88.5

Potograp 5.7 5.8 6.1 5.4 5.0 4.6 3.7 3.1 2.6 2.4

Jewer 17.5 20.7 24.0 26.7 30.3 34.3 36.1 40.0 46.4 54.4

Sierware 4.3 5.1 6.3 7.2 8.4 9.1 8.7 6.9 7.6 8.3

Cois & Medas 2.1 2.3 2.3 1.8 1.6 2.6 2.8 3.0 3.7 5.8

Tota Fabricatio 67.1 76.4 85.9 94.0 103.6 118.1 129.2 126.1 144.8 159.5

Psica Bar iestmet - - - - - - 0.3 1.3 6.1 11.3

Total Demand 67.1 76.4 85.9 94.0 103.6 118.1 129.5 127.3 150.9 170.7

Bio Exports 43.5 92.9 77.2 97.5 155.9 144.2 134.4 117.1 45.4 37.9

Implied Stock Changes (16.4) (52.1) (20.4) (20.5) (62.8) (6.2) 8.2 36.0 87.9 72.9

Sorce: Tomso Reters GFMS

ChInESE SIlvER SuPPly AnD DEMAnD (MIllIOn OunCES)


6/26

6


tat Cia was amost certai a srps prodcer o sier

b te ed o te 1980s ad te remaied so i te 1990s.

B te mid-1990s ad more ta 15 ears ito reorm,

oweer, te Ciese ecoom was o oger a cosed

sstem, ad ocia god ad sier poic ed to icreasig

diemmas or te atorities. For exampe, as te grap

aboe sows, tere were at times extreme arge price

disparities betwee te PBOCs big/seig price ad

te iteratioa price ad tis was a power icetie

to eiter se direct ito te oca market, to export

ocia, or to bid stocks ti more aorabe prices

emerged. uocia fows betwee hog Kog ad

maiad Cia oer tis period was jst oe o te mriad

dicties or te goermet ad te compicated ad

opaqe price ad tax strctre i particar seemed to

ae restricted growt i te sier idstr.

neerteess, tere was a degree o decisio makig

parasis, ot east o a becase te PBOC was

costraied at tat time b te State Coci (wic ad

deegated te task o maagemet o bot metas to

te Cetra Bak). B 1997, te PBOC was aware tat

its stocks o sier were more ta sciet or Cias

ow abricatio eeds, ad so bega a period o beig

egect, refected i te act tat te ocia big

ad seig price was et caged i spite o massie

moemets i te iteratioa price. I eect it tred

ot tat sier was see b te atorities as te meta

trog wic to test te process o deregatio. As

a direct rest o te sot approac to sier market

deregatio, pbic data ad ocia commetar drig

tis period was rare.

liberlization 2000-2012

I 2000, as part o arios market reorm measres,

te sier market a bega to be iberaized. I a

importat deeopmet, Cia eded its 50-ear state

moopo o sier tradig at te start o 2000 ad

te Sagai hatog noerros Meta Woesae

Marketpace (sperseded b te Sagai Wite Patim

ad Sier Excage i 2003) was desigated b te

State Ecoomic ad Trade Commissio as te o ocia

tradig patorm or sier i Cia. Iitia, te excage

ad 56 sier tradig members, icdig oerros

metas prodcers, processig rms ad istittioa

cosmers ad woesaers, wit te mber o members

aig sice rise to more ta 200. I additio, te

preios icese sstem o sier woesae ad retai

prodct maactrig (except cois) was aboised.

Te deregatio o te Ciese state cotroed moopo

or big ad seig o sier aso rested i a rapid

expasio o sier exports i te rst a o te 2000s.

Te spp o sier came rom a mixtre o risig mie

prodctio, growt i imported cocetrates wit a sier

b-prodct credit ad, a, a food o spp rom

(most goermet owed) aboe-grod stocks bit p

oer preios decades. As ca be see i te cart aboe,

Cia ra arge sier srpses trogot te 1990s,

wic rested i a rapid accmatio o bio stocks

oer te same period.

Te growt i sier bio exports was istrated b te

rise i te ee o te aa export qotas issed b te

Miistr o Commerce (MOFCOM). I 2000, or exampe,

te qota totaed 13.5 Moz (420 t). B 2007, MOFCOM

issed a export qota or 144.7 Moz (4,500 t) o sier.

PBOC PRICES PREMIuM/DISCOunT TO InTERnATIOnAl PRICE TOTAl SuPPly AnD FABRICATIOn DEMAnD

US$/oz


PBOC Selling Price

PBOC Buying Price

Premium

Discount

-4

-3

-2

-1

0

1

2

Jan-99Jan-98Jan-97Jan-96Jan-95Jan-94

0

20

40

60

80

100

200019981996199419921990

Millionounc

es

*Including mine production, scrap and imported silver in the form of bullion and

base metal concentrates


Total Supply

Fabrication Demand


7/26

7


Wie it is wort stressig tat exports oer tis period

were cosiderab ifated b rod-trippig o sier (see

Capter 6), tere is o qestio tat te ast qatit o

sier sdde eterig te goba market rom Cia

ad a importat impact o te metas price, peraps

especia i te ear part o te 2000s.

Iroica, gie tat sier was te rst precios meta to

be deregated at te start o te 2000s, it is god tat as

made mc o te rig o te excage rot oer te

ast ew ears. Te primar reaso or tis is tax reated,

i particar te vae Added Tax (vAT). At te time o

te ac o te Sagai hatog noerros Meta

Woesae Marketpace i 2000, te mai resoed

probem cetered o te treatmet o vAT (o 17%) o

trades codcted o te excage. Members o te

excage arged or zero ratig, bt or arios reasos a

dea wit te tax atorities was ot strck. Coseqet

tradig omes did ot take o ad it appears as i

most prodcers ad sers o sier opted to trade o te

excage, ad sa wit o vAT, or wit a percetage

o vAT beig paid (it is ot commo to d sers paig

a aerage o 5-6% vAT. Tere is aso a ge market

i receipts wic eabes sers to aoid vAT atogeter).

O te Sagai God Excage (SGE), b cotrast, a

agreemet was reaced o te treatmet o vAT o god

codcted o te excage, ad god tradig omes

ae rise steadi sice its opeig i 2003.

I additio, gie siers ig price oatiit, it seemed

tat te atorities ad bee extreme catios we

cosiderig itrodcig sier paper istrmets to te

geera pbic i Cia. Tereore, sier paper tradig

o became aaiabe to oca iestors o te SGE i

October 2006, wie psica prcases o sier bio

bars were o aowed sice mid-2009 (amost or ears

ater god iestmet bars were itrodced i Cia).

Frtermore, it was ot ti Ma tis ear tat a sier

cotract was eeta aced o te Sagai Ftres

Excage (god started to trade o te excage i ear

2008).

notwitstadig tese probems, it is remarkabe ow

mc progress as bee made i te ast ears. For

exampe, Cias poic sccesses i te sier market are

cosiderabe:

The PBOC has now stood back from its position as

monopoly buyer and seller of silver.

Producers and users of silver can freely buy and sell the

metal (often without paying VAT).

From a relatively small player two decades ago, China

last year became the worlds second largest consumer

and third largest producer of the white metal.

There are currently three exchanges that offer silver

paper trading for private/institutional investors and

silver producers/manufacturers.

The general public is allowed to buy/sell investment

bars and coins.

We oe tiks o te expropriatio o a priate god ad

sier i te Ctra Reotio rom 1966 to 1976, te te

strctra ad ideoogica cage oer te past 30 ears

ae bee tr mometos.

REGIOnAl FABRICATIOn DEMAnD, 2011REGIOnAl MInE PRODuCTIOn, 2011


CIS

China

Europe

Latin America

Asia

(ex. China)

North America

Oceania

Africa


Other

China

Europe

India Sub-Cont.

Asia

(ex. China)

North

America


8/26

8


3. silver supply in china

introduction

Accordg to Tomso Rtrs GFMS aass, tota

Cs spp o sr as jod a rapd growt or

t ast dcad or so, wt oms rsg rom 94.2 Moz

(2,930 t) to 281.5 Moz (8,756 t) btw 2002 ad 2011.

Ts rapd xpaso was d to a combato o, rst,

sbstata coomc growt drg ts prod (GDP

growt as aragd 10% or t ast 10-ars), gtg

dstra dopmt, ad scod, rsg commodt

prcs wc pd accrat xporato, dopmt

ad, tr, m otpt.

Tr ar or ma compots o Cs sr spp.

Frst, m prodcto, wc ast ar rcordd a

cras or t t cosct ar to rac 104.6 Moz

(3,253 t), cotrbtg 37% o t tota. Scod, domstc

scrap spp (cf dstra rccg) as b rsg

stad as Cs dstra abrcato as crasd

rapd, tg spp rom ts sgmt to 31.9 Moz (992 t)

ast ar.

T trd sorc o spp s mportd sr bo,

as crta dstra srs o sr, spca org

opratos wt strgt qat rqrmts, td to

brg mta dspt ts bg mor xps ta

sorcg t oca markt. Atr rsg to a pak o or

30 Moz (930 t) 2006, spp rom ts ara as b o

a stad dcg trd, rfctg major mpromts

t qat o sr bo prodcd Ca (dscsso

o ts ara w b cord Captr 6).

T a cotrbtor o Cs spp, ad t argst

spp sd actor t domstc markt at ar a a

o t tota 2011, s sr rcord rom mportd bas

mtas coctrats, ma a b-prodct o coppr, ad

ad zc prodcto. Tomso Rtrs GFMS data sows

tat rcor o sr rom mportd coctrats as

dd grow rapd sc t brazato o t Cs

sr dstr. Pror to ts sgcat dopmt t

PBOC cotrod ad st t domstc sr prc (ot

sgcat owr ta t tratoa prc) rmog

t ct or a orgazato to sp g sr

cotag coctrats to Ca. Sc drgato,

owr, a mor traspart prcg strctr ad Cas

at apptt or ad, coppr ad zc, copd

wt t xpos dstra growt as s rcor

rom ts sorc pak 2008 at 150.3 Moz (4,676 t).

Tratr, owr, sr rcord rom mportd bas

mta coctrats as b oowg a dcg trd,

atog ts oms as rmad at xcptoa g

s.

mine production

A dcad ago, Ca was a sod md-tr prodcr o

sr, wt otpt 2002 o 52.9 Moz (1,646 t). Ts

pacd t as t ort argst bd t orwmg

domac o Pr ad Mxco, as w as Astraa. Sc

t, rapd ad amost trrptd prodcto growt,

at a compod aa growt rat o 8%, as s ts

postog st to brdg t od ad bcom o o

tr k pars t sr mg dstr.

W t goba proporto o sr prodcd as a b-

prodct o otr mta mg stads at 71%, Ca

ts gr s sbstata gr, wt jst dr 95% o

domstca md sr orgatg as a b-prodct o

otr md mta prodcto. Mc o ts s sorcd

rom ad-zc dposts, wc 2011 accotd or a

stmatd 72% o Cs domstc m spp. Coppr

s stmatd to a accotd or 18%, god or 3%, ad

t baac o b-prodct prodcto to mtas sc as t,

ck ad tgst.

Or t past ars Cs b-prodct sr

prodcto s stmatd to a rs b 37%, or 29 Moz.

W sr prodcto growt as b spportd b a

growg domstc sr abrcato dstr, t mst b

ackowdgd tat mc o t growt sr m

spp as b cdta to ts trd. Ratr, growt

sr otpt as b dr b t d to cras t

prodcto o bas mtas to spp domstc abrcators,

TOTAl ChineSe SilveR SuPPly in 2011

Total Supply: 281.5 Moz


Mine Production

37%

From Imported

Concentrates

49%

Bullion imports

3%

Scrap Supply

11%


9/26

9


a attmpt to rdc Cs rac o mportd

coctrats. Or ts sam prod Cs prodcto

o coppr, ad ad zc s stmatd to a crasd

b 42%, 77%, ad 51% rspct. A asd to t bas

mta stor s t cras sr rcord rom t

growg god mg sctor. Cs god prodcto s

stmatd to a crasd b 50% or t past

ars, wt a assocatd rs t oms o sr

rcord.

Tr ar a mbr o actors bd ts crass

mta otpt. Cotd stmt t Cs mg

dstr b t argr, stat-owd mrs as cotd

to d prodctt ad otpt xpasos, bot trog

t dopmt o w m sts, ad t modrzato

o qpmt ad procsss at xstg sts. Mrgr ad

acqsto actt, cosodatg smar pars amog

t argr dstr partcpats, as aso pad a ro.

Stat-owd mrs ad t argr tgratd prodcrs

gra a bttr accss to crdt rom stat baks,

ad ar ts bttr ab to watr prc oatt ad

adrs markt codtos, abg tm to cosodat

smar pars, or tak addtoa markt sar. Mor

rct w a s domstc mrs ookg orsas or

rsorcs trog mrgr ad acqsto actt to scr

coctrat ad mta spps or mport back to Ca.

W aso stmat tat xporato spdg Ca

rmas atd, wt t argr mrs drtakg

aggrss xporato programs cotr.

T prmar sr mg dstr Ca s mtd

om. For a sr mg t sod b sad tat ad

ad zc ar commo co- ad b-prodcts, ad w r

rqt b bratd togtr rom a dpost. i Ca,

t occrrc o ms tat dr a majort porto o

tr r rom sr (prmar sr ms) ar w

mbr wt ms tat prodc sr ct as a b-

prodct to otr mta mg mc mor sa.

T prcpa prodcr tat accots or t majort o

Cs prmar otpt s t yg mg compx

ha Proc, wc comprss sra drgrod

ms accssd a adt ad dc sats, ad a

coctrator pat. Caada-std Srcorp Mtas as

majort owrsp o t proprts, trog two So-

org jot trs. Most o Srcorps prodcto

coms rom ts assts ad spcca a sg mg

oprato, t SGX t, bt t broadr yg oprato

aso corporats tr otr prmar sr ms ad a

sr-rc ad m. Coctrat prodcto commcd

2006, ad s trckd as a ad-sr coctrat ad

a zc coctrat or trd part procssg ha. i

rct ars paab sr prodcto as b arod 5

Moz (156 t) aa.

ChineSe SilveR Mine SuPPly By SOuRCe MeTAl

(Moz) 2007 2008 2009 2010 2011

Prmar Sr 4.0 4.4 5.0 6.3 6.1

God 2.2 2.3 2.5 2.7 2.9

lad/Zc 56.6 60.0 61.5 66.7 75.6

Coppr 14.9 16.5 16.2 17.3 18.4

Otr 1.6 1.6 1.6 1.6 1.6

Tota 79.3 84.8 86.8 94.6 104.6

Sorc: Tomso Rtrs GFMS

TOP SiX SilveR MininG COunTRieS, 2011

Total Production: 505.3 Moz, 66% of Global Total


Mexico

Peru

China

Poland

Australia

Chile

ChineSe SilveR Mine PRODuCTiOn

0

20

40

60

80

100

120

201120092007200520032001

Millionounces

Source: Thomson Reuters GFMSSource: Thomson Reuters GFMS

(tosad tos) 2007 2008 2009 2010 2011

God (tos) 280 292 324 351 371

lad 1,402 1,403 1,604 1,981 2,358

Zc 3,048 3,343 3,324 3,842 4,308

Coppr 946 1,023 1,041 1,155 1,265

Sorc: Tomso Rtrs GFMS, WBMS, iCSG

ChineSe DOMeSTiC MineD MeTAl PRODuCTiOn


10/26

10


Domstca owd ad r prmar ms o a

mag sca ar w mbr ad or qrs

arod prmar sr ms ad projcts a sa

ctd modst opos o ts sctor d to tr bg

rat tt ocs o sc assts, dd most bg

pomtac ad/zc domat dposts tat prodc

assocatd sr ad/or god. T c xcpto w ar

awar o s t stat-owd hb Fgg m tat s

gra rgardd as a prmar sr m. W stmat

t as prodcd arod 0.6 Moz (20 t) aa rct

ars.

Prmar sr prodcto costs or ms wt t yg

compx, t SGX ad TlP ts, atr t owr

qart o t dstr cost cr ora. idd, taks

to ad ad zc crdts (b-prodct accotg) SGX

as rportd gat sr cas costs or sra ars.

howr, t XBG m, a sma oprato aso ha,

s postod ss comptt at t ppr d o t

cost cr, part, w b owg to ts comparat

smar sca o mg ad procssg opratos.

ndss to sa, g t mtd popato o Cs

prmar ms ad tror tos atrd t goba

aass, cato sod b xrcsd bor attmptg

to graz tat tpca Cs sr mg costs ar

spca ow rat to t tratoa pr grop.

mininG outLooK

Prodcto rom prmar sorcs Ca s xpctd to

cras strog or t xt w ars as prodcto s

razd rom w projcts. notab, t yg oprato

comptd a m xpaso md-2012, takg stad

coctratg capact rom 2,500 mtrc tos pr da

(tpd) to 3,200 tpd o or. Frtr ot, tr ar a ad

o possb dopmt projcts, cdg two adacd

projcts Gagdog: Srcorp s costrctg t

1,600 tpd Gaocg m ad m ad targtg rst

prodcto 2013. Mco Sr adacd ts 90% owd

Fwa projct to asbt stag 2009 ad ag

rasd ac, s crrt at t prmttg stag or a

3,000 tpd drgrod sr-ad-zc m ad procss

pat, wc s targtg a 2014 start. Stad stat sr

prodcto cod b 5.5 Moz (170 t) pr ar. Som prmar

sr dposts aso occr ir Mogoa, wr Sr

Drago Rsorcs rct rportd som g grad dr

ts o xporato proprts atog ts w k b

a og trm proposto or w.

Wt rgard to Cas god dstr, prodcto t

rst sx mots grw b a stmatd 7%. For t -

ar, ad to 2013, w xpct god otpt oms to

cot to cras, prmsd o rtr cosodato

SiLver occurrenceS in china

T goog o Ca s crta prospct or xporato

sccss. Sr occrs mra assmbags ard googca

sttgs, ad s sa od cojcto wt otr mts

sc as ad (Pb), zc (Z), coppr (C), t (S), atmo (Sb),

tgst (W), god (A), bsmt (B) ad mrcr (hg), wc ar

xtractd at t smtg ad rg stags to orm a aab

co-prodct. Som o t ma occrrcs cd:

Marine volcanic sedimentary rocks hosting massive sulfde

Pb-Zn-(Cu)-Ag ores and stratiorm Ag-(Au) ores.

Continental volcanic sedimentary rocks containing

polymetallic silver veins and/or stockworks and Ag-(Au)

veins in pyroclastic rocks.

Rocks aected by metasomatic processes including W-Ag

quartz veining, Pb-Zn-(Cu)-Ag skarns, Sn-polymetallic-Ag

ores and Ag-(Au) veins in altered carbonate rocks.

Metamorphic-intrusive rocks, principally Ag-(Au) veins in

shear zones.

Sedimentary rocks including stratiorm Pb-Zn-Ag ores in

carbonates, silver bearing manto deposits and Cu-(Ag)

layers in red sandstones.

Gossan type ores ormed rom weathering.

Ts or dposts wr ormd, as a grasato, rom tr

t procss o orogss (mota bdg) or rom prods o

trs ad xtrs ocasm, rstg t coctrato

o or mras rom mta rc fds wt t crst. T ard

atr ad qatt o ts dposts s tstamt to t og

googca stor o t Cs trras, gg amp tm ad

opportt or ts coctrato ts to occr: rocks a

b od Ca datg approxmat 3.8 bo ars

ag. it sod aso b bor md tat Ca rprsts arod

6% o t goba admass, ad tror tr s a arg ara o

prospct trra or t Cs Googca Brgads to xpor.

T utd Stats Googca Sr stmat tat at d-2011

Ca ad t t argst rsrs o sr wordwd, at 1,382

Moz (43,000 t), bd Pr, Poad, C ad Astraa. it

sod b rmmbrd tat ts s a damc gr, sbjct to

statstca rassssmt, addtos trog xporato sccss

ad rdctos rom dpto trog mg. W wod b

skptca o sggstg, owr, tat t Cs sr rsr

bas as b acg t dpto or rct ars, g

ogog xporato orts -cotr copd wt t strog

prc prormac o sr or t past tr ars, wc w

crta mak t mta a crasg attract xporato

targt ts ow rgt, as w as a mor mportat co-prodct to

bas mta ad god xporato.


11/26

11


ad modrsato o t cotr s domstc opratos,

agast a backdrop o atd god prcs, wc w

cot to cts ts actt. W orcast sr

rcord as a b-prodct o god mg actt to

cot to grow cocrrt.

natoa data rom or t rst s mots o 2012

dcats md coppr otpt s p b or 12% ar-o-

ar. Ts mps tat aa prodcto w rac or

1.5 mo tos o md coppr, a cras o 16.5%.

howr, wt w otr major projcts scdd to

dr or t xt two to tr ars, t rat o growt

s sbsqt xpctd to sow rom crrt s,

towards 2-3% pr am. T xtt to wc growt

ca b matad w b fcd part b t coppr

prc ad a wakg cod s spp rom marga

opratos bcom protab, wt a cocrrt mpact

o sr sorcd rom domstc coppr ms.

Sgcat oms o ad ad zc capact a

cotd to b addd ts ar 2012, ad w xpct

growt ad ad zc prodcto to amot to 27% ad

20% rspct. Combd wt or orcast or gr

arag prcs 2013, w xpct otpt growt to rma

dob dgt trrtor or xt ar as w. Sbsqt

to ts, atd growt rats ar orcast to b matad

or t oowg sra ars, as mpd b Cas 12t

F-yar Pa wc prodd gdac o coomc poc

or t prod 2012-2015, as t prtas to t domstc

o-rros mtas dstr.

Takg ts otooks togtr, w xpct tat, k

prmar sr, t s o b-prodct sr rcord

rom t coppr, ad/zc ad god sctors w, as a

grop, cras 2012 ad 2013.

production From concentrateS and

reSidueS

Trg to t sr smtg dstr Ca, g t

arg oms o ad prodcto Ca, ts ctrs

most arod t procssg o bot domstc ad

mportd ad coctrats, ad t rprocssg o

prcos mta barg aod sms rom bas mta

smtrs, wc aso s bds o domstc ad mportd

dstock.

i som stacs, or cotacts a ormd s tat most

o t prot marg wt t bsss o r-procssg

aod sms ad otr rsds as b rom gas

sr prcs ad t rcor o mor mtas (wc ot

ma ot b a paab mta t rg cotract), ratr

ta rom t rcor o rsda bas mtas.

howr, d to srs mprss prc prormac

t ast cop o ars, a growg mbr o bas mtas

smtrs ow td to r-trat sr-barg aod sms

tmss stad o sg tm to trd parts. Ts

s car xprssd b or cotacts yogxg Cot

(ha Proc), wc cas ts t sr capta

Ca, wr aa sr otpt s rportd to a

totad 67.5 Moz (2,100 t) 2011 (tog w b t

oca mbr s fatd b sgcat dob cotg).

Bass or ormato, t bk o sr prodcto ts

ara, or ma ars, coms rom bas mtas sms,

ad partcar. W t xpaso o t bas mtas

sctor as s otpt rom ts rgo post robst gas

or t ast dcad, smtrs tat w a spok to

tat rgo amos dcatd t crasg dct

o sorcg aod sms ad sags rom major bas mtas

prodcrs. i addto, as t orwmg majort o

PRiMARy SilveR CASh COSTS (2011)

US$/oz

-10

-5

0

5

10

15

20

25

30

35

40

US$/oz


0 10 20 30 40 50 60 70 80 90 100

-10

-5

0

5

10

15

20

25

30

35

40

2011 Average Silver Price ($35.12/oz)

2011 Total Cash Cost (Average = $8.07/oz)

Cumulative Production %

XBG

TLP

SGX


12/26

12


ts oca smtrs ar prat owd, tgt crdt mts

rom stat baks ad tr xposr to oat sr prcs

a rstd a sarp dc prot margs.

T dstr aso procsss som sr barg dor rom

god ms. i ts cas, t smtg dstr ctrs o

t argr, stat r tgratd trprss, wc ma to-

trat matra o ba o smar prodcrs addto to

tr ow md otpt.

Frtrmor, t gormts atst F-yar pa, o

o t ams was to cot to promot tgtr rgato

ad stadards romta cotros. i partcar

t mtod two targts: to rdc rg ad carbo

doxd tsts b 16% ad 17% rspct, ad to

ct t dscarg o ma potats b 8-10%. Wt

ts ramwork o gratr rgato o mssos ad

dscargs, w xpct ts to pac addtoa prssr o

t Cs smtg dstr to rtr modrz.

i sc a stato, w xpct tr to b cotg

cosodato t bas mta smtg spac Ca,

as smar compas, wc ma ack t as accss to

crdt or cas to rrbs or rtrot tr opratos, ar

absorbd b argr compas, ma o wc addtoa

boast rg acts, prodg t adatag ot o

o sca, bt o rtca tgrato. largr, stat owd

compas ma aso a asr accss to crdt rom

domstc baks d to tr qas-gormt stats,

wc as t addtoa bt o prodg som

sato to cas fow agast somtms oat mta

prcs.

Tota sr otpt Ca was stmatd b

t Ca norros idstr Assocato to

b 397.0 Moz (12,348 t) 2011, a cras o

jst or 6% ar-o-ar. W ookg at

som o t rportd prodcto oms rom

bas mta smtrs, ts ma ot rfct t

scop o t stato. i or ast rport o

t Cs sr markt, prodcd 2005,

w otd dc xsts o dob cotg o

statstcs or sr prodcto Ca, ad

som cass, dr-rportg. W b ts s

st t cas, prmar as a rst o dscssos

drg o-t-grod d rsarc. it s wd

ackowdgd tat t gr o tota rd

prodcto ctd b gormt agcs as

sgcat scop or trprtato. Spcca

tat tr ar k to b stacs o dob

cotg o tota sr otpt across t

m, smtr ad rr s. i addto, ts grs

ca cd t rccg o scodar matras sc as

ctroc scrap, ad potta t pgradg o sr

bars btw o rr ad aotr.

Praps most mportat, ts tota otpt masr

appars to ot drtat btw t aros sorcs

o rr dstock sorcd at domstc ms rom tat

sorcd rom mportd sr-barg m prodcts. Ts

rprsts a damta drc wt Tomso Rtrs

GFMS mtodoog, sd across or mg rsarc,

wrb md prodcto s attrbtd to t cotr o

org o or, ratr ta t cotr wc matra

s smtd/rd. Rd prodcto s aatd

sparat as part o t baac o trad fows wc ds

to or assssmt o spp ad dmad at t cotr

.

Car Ca s ot ao ts ro as a prcasr o

dstock rom tratoa sorcs. T coctrat

trad s a w stabsd goba bsss ad os t

sppg o sbstata oms o matra or smtg

at acts across east Asa gra. eswr, a w

mor spcc xamps o sc fows cd: coctrats

sorcd Rssa wc ar procssd Kazaksta,

Astraa coctrats procssd to sr mta

ida, ad Astraa crd ad bo sppd or

rg t utd Kgdom. Frtrmor sr barg

dor s rot trasportd or rg aotr cotr

to tat o t m rom wc t orgatd. D to t

atr o t Cs dstr, bg r ragmtd ad

opaq atr, drg a bottom-p srs or Cs

sr prodcto s tror r dct. i ordr to

ss-cck a rastc stmat or Cs domstca

md sr, w b t s o t tmost mportac to

TOP 10 SilveR PRODuCeRS in ChinA

(Moz) 2007 2008 2009 2010 2011

ha ygag God ad lad Grop 18.3 19.4 19.7 19.5 22.3

Jagx Coppr Corporato 11.6 13.1 13.9 14.5 16.4

ya Coppr Co. 17.5 10.9 10.0 11.3 15.2

ha Czo Jg Sr idstr Co. 13.2 9.6 10.2 8.4 14.5

ha Ja J God ad lad Co. 8.4 9.0 10.7 11.4 13.8

Togg no-Frros Mtas Grop 3.1 5.3 10.0 13.1 13.3

hb Da no-Frros Co. 8.1 8.4 8.7 10.9 11.3

ha ytg no-Frros Mtas. Co. - - 11.5 9.2 10.9

ha Skosa no-Frros Co. 8.9 9.5 9.6 7.7 7.3

SZ Zogj lga nomt Co. 6.0 4.2 4.1 5.1 7.3

Otr 197.3 218.8 224.4 262.5 264.7

Total Supply 292.3 308.2 332.7 373.5 397.0

not: Sr prodcd rom bot domstc ad mportd coctrats.

Sorc: Atak


13/26

13


mak a assssmt o t qatts o sr mportd

rom org-sorcd coctrat tat s mpct cdd

oca prodcto statstcs o sr.

T Cs markt or mportd coctrats s

domatd b fows o coppr-barg matra. lookg

at t trad o t major bas mta coctrats rat

to t sr markt (coppr, zc ad ad), accordg to

cstoms data, coppr coctrat comprsd 59% o t

gross wgt o ts mports 2011, oowd b zc

(27%) ad a ad (13%). howr, w cosdrg

sr fows wt ts spmts, sr grad (ad to

a ssr xtt, procss rcor) s pota, as otd

bow.

Aatca srcs compa Ax Stwart itratoa

prodd Tomso Rtrs GFMS wt a rag o sr

cott data rom bas mta coctrat assas across

a rag o adg cotrs tat sp coctrats to

Ca. Or mtodoog to stmat ts fows o sr

cotad coctrats to Ca was basd o ts

assa ormato cojcto wt mport data ad

proprtar stmats or tpca rats o procss oss or

dowstram procssg o sr assocatd wt coppr,

ad ad zc. Grads o sr ma ad coctrats

ca b xcptoa g, ragg rom a w drd to

sra tosad grams pr to (g/t). B cotrast, coppr

coctrats mgt grad rom 100-1,000 g/t wt zc

mor tpca rom 50-300 g/t rag. it s or opo

tat ma o t gst (sr) grad coctrats ar

ot sppd to Ca owg to t vAT strctr, dscssd

atr. T data o coctrat grads dcats to s tat

tota sr mportd ad dd rom ad coctrats

as b broad smar to tat rom coppr, som ars

rprstg t adg sorc o sr rom coctrats

mportd to Ca, cdg ast ar, at arod 68 Moz

(2,100t), ot o tota rcorab mports o 136.9 Moz

(dr 4,259 t).

Tr ar a mbr o rasos or ts skw o sr

cotts bg aor o ad. it s sa or ad-zc

ms or pomtac ms o mag sca to dsg

t procss fowst to prodc two or mor coctrat

strams ratr ta a sg bk coctrat wc

a paab mtas ar cotad. B dog ts, otak

ca b gotatd wt mtp smtrs/rrs bst

std to ad ac rspct stram, t trsts o

acg bttr pa s agast t cotad mta.

Psca rcor o sr trog zc procssg prsts

mor cags ta or rcor rom ad smtg, ad

tror acts rats o pamt smtrs ar prpard

to or prodcrs agast cotad sr. upstram, at

t coctrator stag, sr sd mras (sc as

argtt, Ag2S) ar cmca smar to, ad w most

commo assocat wt, ad sds (sc as gaa,

PbS) or zc sds, most otab spart ((Z, F)S).

Cosqt, t s orma or sr sd mras to

rad rport to a ad coctrat stram t fotato

procss as a mattr o cors. Bt g tat mor

aorab sr pamt trms arab xst or ad/

SilveR FROM ChineSe COPPeR COnCenTRATe iMPORTS

SilveR FROM ChineSe leAD COnCenTRATe iMPORTS SilveR FROM ChineSe ZinC COnCenTRATe iMPORTS

0

10

20

30

201120102009200820072006

Millionoun

ces


South Korea

Australia

Peru

Other

Mongolia

Kazakhstan

0

10

20

30

40

50

60

70

80

90

100

201120102009200820072006

Millionoun

ces


Russia

United States

Peru

Other

South Africa

Mexico

0

10

20

30

40

50

60

70

80

90

100

201120102009200820072006

Millionounces


Chile

Mexico

Peru

Other

United States

Mongolia


14/26

14


sr coctrats ta or zc/sr, fotato pat

procsss w b rtr optmzd to sr t maxmm

proporto o sr rports to a ad stram wt sr

rportg to a zc stram to b mmzd.

it sod b rtratd tog tat w ts s rcordd

as Cs prodcto b t domstc statstcs agcs,

t Tomso Rtrs GFMS mtodoog s to attrbt

ts prodcto to t m st ad cotr o org o

or. itrstg, t growt o ts major sorc o sr

to Ca as casd or t past (or) ars, oowg a

prod o xcptoa growt rom t brazato o t

markt t 1980s trog 2008. idd, sc t, b

or stmato, compot o Cs sr as cotractd

b 9% sc 2008.

O mportat actor tat as rstrctd growt

mportd bas mtas coctrats rct ars rats

t tax ss ad prc drcs btw oca ad

tratoa markts. As mtod arr ts rport,

sc t brazato o t Cs sr markt, a

sr trasactos ar sbjct to 17% vAT Ca. i

otr words, oca smtrs d to pa 17% tax o sr

cotad mportd coctrats (tpca basd

o tratoa prcs). howr, as domstc prcs

(xcdg tax) a b tradg cosstt owr

ta t tratoa prc, t s ot srprsg tat oca

smtrs td to prr ow sr cott mportd

coctrats. it s wort strssg r tat sr prcs

qotd o commodt xcags Ca a arad

cdd a 17% vAT. As sc, w t pbsd sr

prc Ca ma sm to od a sma prmm or

t tratoa prc, t s wrog to cocd tat oca

compas cod bt rom sr rcord rom

mportd coctrats.

Back to t md-2000s, dspt t owr domstc prc,

osss wr aodd as oca sr prodcrs ad tradrs

cod gt a 13% vAT rbat o t a o t sr

xportd. Moror, ts ct was xpotd b crta

tts tat gagd rod trppg o sr btw

maad Ca ad hog Kog, wc sbsqt

gratd cosdrab prots. Ts, aog wt t rapd

xpaso o t bas mtas sctor, d to a sarp rs

coctrat mports to Ca or t sam prod.

howr, as t sr tax rbat was rdcd to 5%

2007 ad t rmod t oowg ar, t ct

to brg sr rc coctrats as rdcd cosdrab.

Scrap

Aazg Cs scrap spp as awas b a dct

task ot ast bcas o t ragmtd atr o t

bsss. Obtag rab data as b cagg

g t gograpca sz o Ca ad ot rmotss

o t dstra ctrs wc ar sprad ar ad wd

across t cotr.

Tomso Rtrs GFMS stmats o sr scrap

ra a rapd accrato spp or t ast

dcad. i ssc ts as cf b t rst o

t trrptd srg coomc growt (Ca GDP

growt as aragd 10% or t ast 10 ars) wc as

stmatd dstra xpaso, wt t at rs

rcor t bt o mass stmt rastrctr

ad dstra otpt.

i 2001, Cs sr scrap spp was ss ta 10 Moz

(310 t). Sc ts pot scrap as rs mor ta tr-

od as dstra abrcato as rapd crasd racg

31.9 Moz (992 t) 2011. Sr rcor or ts tm

as ma orgatd rom sd m, scrap capactors

ad sd comptr ad cotact matras. Moror,

t ast w ars tr as aso b a otab rs

spp rom spt t oxd (eO) catasts sd t

prodcto o dtrgts, sots, pastcs, ad aros

orgac cmcas sc as t gco.

i addto to domstc spp tr as pros aso

b a cotrbto rom mports wc prmar took t

orm o ctroc scrap (e-scrap) rom t dstrazd

word. Atr brazato o t sr markt 2000

ts opd t door or a srg mports as org

compas ookd to captaz o t capr procssg

costs. Cs atorts mod to stop ts practc

2002, ct bag mports o ctrca tms sc

as tso sts, comptrs, potocopg macs,

do camras ad tpos d t g o

azardos wast. Addd compcatos cocrg

mportd scrap, spca o ctrocs org, ar rst,

wtr t matra s acta r-sd or g

scrappd, ad scod, jst ow mc g grad

matra s acta sppd . W tr as b

masr trodcd to rdc ts trad t appars t

som e-wast rom org cotrs s st trg Ca,

som trog oca cas ad som rportd a

oca mas.

lookg brf at rct scrap s ras spp as

rs at arag o 12% or t ast tr ars. Ts

oowd a fat rst 2008 as dstra abrcato


15/26

15


oms tat ar wr actd b wakr xport dmad

as wstr markts t t rst acts o t aca

sowdow. Sc t, owr, sr scrap as rs

stad, wt domstc cosmpto gas pg to ost

osss t xport trad. idd, t rapd growt o

Cas mdd casss ad rbazato o t cotrs

tror as stmatd dmad or ctrca ad ctroc

prodcts o t om rot, rtr boostg rccg

oms. i addto, ast ar t Stat Admstrato

o Taxato ad Mstr o Fac trodcd w

gsato tat w rdc or mat a-addd tax

(vAT) brds o trprss tat rcc wastd rsorcs

drg prodcto a bd to rtr promot t cotrs

crcar coom tat maks dstra maactrg

mor romta rd. i trms o sr rcor,

t 50% vAT rbat o ctrca ad ctroc osod

appacs sod prod t patorm or a gratr

rccg o ts prodcts.

lookg aad, w xpct ogog dstra scrap

growt to ost t dc xpctd rccg rom t

potograpc dstr. idd, t mgrato to dgta

camras ad otr assocatd tcoog as arad

ad a sgcat mpact o sr ad rcord rom

cosmr m ad potograpc papr ad s k to

s rtr as tr ars. W bot o ts

aras o spp ar ot gra prc sst ad,

t cas o dstra rcor, kd cosr to coomc

growt, spp rom rccg o jwr ad srwar s

ar mor prc astc. i, as xpctd, sr prcs mo

gr 2013 t w wod xpct a rs spp rom

ts sgmt as sr assts ar tasd ot to grat

prots. logr trm w wod xpct Cas sr scrap

spp to cras wt coomc growt. W

sowg sgt ts ar Ca s st to st dr at

GDP growt ad wt xpctato o rtr coomc

adacmt comg ars spp rom ts sorc

sod cot to rs.

Government StocK SaLeS

As w strssd Captr 2, pror to t brazato o

t sr markt Ca wc startd 2000, a sr

prodcd was oca rqrd to b sod to t Pops

Bak o Ca (PBOC). Dspt a szab om bg

sod oca b prodcrs ad sbsqt xportd,

t s bd tat mc o t xcss spp was smp

stockpd.

T rst sgs o ts cagg occrrd t md-1990s

w t was dcatd to s b t PBOC tat t o

ogr wsd to prcas a mor sr bcas o wat

t prcd to b sct, ot xcss, stocks. T

rst xporator sas rom ts oca stocks startd

1998 ad t ros sarp t oowg ars, as t

Cs sr markt startd to braz. At t sam

tm, fows rom wat w a trmd qas-oca

stocks (tpca d b smtrs ad mrs bcas tr

was tt opportt cost to tm o odg d stocks)

bga to pck p.

Atr car aazg t k mts o t Cs

sr spp/dmad qato, or stmat sows tat

t gormt stock sas rom Ca tota amost 350

Moz (10,880 t) rom 1998 to 2006, accotg or mor

ta 4% o t goba sr spp or t sam prod.

From 2007 owards, owr, w ar codt tat t

PBOC as stoppd drg a matra sas to t

markt. i ssc, ts s d to t act tat, oowg

sra ars o a sas, t cotrs sr stocks a

arad b rdcd sgcat rom xcss s,

ad rmas stocks w pa som part drsg ts

rsr portoo awa rom uS doars.

ChineSe neT GOveRnMenT STOCKS SAleSChineSe SCRAP SuPPly

0

5

10

15

20

25

30

35

201120092007200520032001

Millionounces


0

10

20

30

40

50

60

70

80

201120092007200520032001

Millionounces



16/26

16


4. SILVER FABRICATION DEMAND IN CHINA

iNtroDUCtioN

Sic th ibaiati th Chis siv makt at th

stat 2000, siv abicati ma has w at a

ava aua at 12% thuh t 2011, with tak

isi m 48.7 M (1,514 t) t 159.5 M (4,960 t) ast

a. This is i stak ctast t th st w wh

siv abicati i act pst a ub-iit a v th

sam pi.

Chis abicati ma siv cms m a

umb aas, th mst imptat bi iustia

appicatis which hav w siicat v th past

tw cas a ast a accut 56% tta

Chis siv abicati. Th sc ast suc

ma is siv jw w b sivwa, bth

which hav as pst succssiv c hihs i

ct as, chif u t st wth i mstic

csumpti a xpt ma. Ath aa that

has j hath ais is cis & mas (th t i

this smt wi b iscuss i tai i Chapt 5). I

ctast, th us siv i phtaph has xpic a

cii t sic 2005.

B viwi ach cmpt, it is wth stssi

that it has at tims b chai t spaat ut

mstica abicat siv pucts m ths

impt. F xamp, th siicat icas i th

assmb busiss i Chia has taitia b m

impt itmiat pucts, thuh this has vv

i ct as, with a icasi vum cmpts

Chias assmb iust w bi puc

mstica m siv bui. This has t t cu

th statistica pictu a has th a t th

uctait stabishi iab wth stimats

siv ma.

iNDUStrial aPPliCatioNS

Chis iustia abicati has pst a

uitupt wth (with th xcpti a ip i 2009)

m tha 20 as, cimbi m 12.9 M (401 t) i

1990 t 88.5 M (2,754 t) ast a. This ais its sha

ba siv iustia abicati m a m 5% t

18% v th sam pi, vati Chias psiti t th

ws sc ast iustia abicat at th Uit

Stats.

Th mai ivs this utstai pmac hav

b icasi iastuctu xpitu i Chia a

a massiv is i iust utput, which hav bst

csumpti iustia mtas. Mawhi Chia has

as b ab t capitai its a a w wa

wkc, which has th bt m sh

catis m hih-cst cts. I aiti,

icasi p capita icms hav it mstic

csumpti csum uabs a ctics

pucts.

lki aha, spit th cmic wth i Chia v

th ast tw cas, its ubaiati, which is cs

ik t miati a iustiaiati, is sti at

a ativ w v. As a pcta th tta, th

uba ppuati xc 50% i Chia th st

tim ast a, cmpa with 80% i oeCd mmbs. I

i with this, Chis p capita csum spi sti

mais w i cmpais t ma matu cmis.

Th utk siv us i iustia appicatis

i Chia th ctius t b quit pmisi, as

mstic ma siv-bai pucts, such as

autmbis, psa ctic pucts a whit s

is cast t maitai st wth.

CHIneSe SIlVer FABrICATIon deMAnd In 2011 CHIneSe IndUSTrIAl FABrICATIon

0

20

40

60

80

100

201120092007200520032001

Millionounces


Brazing Alloys and Solders

Other

4

6

8

10

12

14

16

Annual GDP

Growth %

Electrical and Electronics

Total Fabrication Demand: 159.5 Moz


Industrial Applications

56%

Jewelry

34%

Coins & Medals

4%

Silverware 5%

Photography 1%


17/26

17


Bsis this, th i iastuctu ivstmt b th

vmt mas that siv us i th cstucti

sct wi is uth, athuh wth is ik t as i

cmi as cmpa with th pvius ca, i i

with th hih bas a i ts b th vmt

t cub spcuativ a stat pjcts. Fia, iv a

api icas i ab csts, catis m vp

cutis t Chia is ik t sw csiab v th

xt w as, athuh this wi b patia st b th

ctiu fw busisss it Chia i t bt

m ict accss t th ca makt.

I tms th spcic ata sis, Thms ruts gFMS

hav taitia bk w Chis iustia ma

it th mai k catis cvi, ctica a

ctics, bai as a ss a th (icui

battis, a chmicas). each is iscuss bw i m

tai, but t usta thi ativ imptac th

tab bw shws u stimats ach cat v th

past ca.

eleCTrICAl And eleCTronICS

Th ba ctica a ctics sct t

accuts th ast sic ma i th iustia

i Chia, but has j bust wth v th past

ca, isi m 17.1 M (532 t) i 2002 t 40.0 M

(1,243 t) ast a.

K t this impssiv pmac has b a api

xpasi i th cut s smi-cuct sct which

pst a ava aua wth w abv 20% m

2001 t 2011, cmpa with 5% ist b th ba

smicuct iust v th sam pi. Th massiv

utpmac was pimai a ucti st ais i

mstic csumpti cup with isi xpt ma

(twithstai a stback ui th ba cmic

wtu i 2009).

lki at th iiviua scts i m tai vas a

simia patt wth acss a a appicatis. I

paticua, a su i c ph a cmput pucti

it Chis utput t accut ast a t abv 70% a

90% spctiv th ba tta. This was i aiti

t a siicat is i ma th psa ctic

s, with th atst aa wth witss i

tbks, tabt cmputs, a led pucti

us i led-backit lCd tvisis. Uik sm wst

makts which a achi satuati pit i tms

th csumpti ctic pucts, Chia is w

bii t accss ths m aab puct as.

Futhm, i ma istacs, ctic itms hav a

imit sh i, m imptat, a sht ashi i,

with ma csums ctiua upai thi pucts

as w ms bcm avaiab.

gwth i th ma ctica ctacts withi th

autmtiv sct has as t a siicat icas

i tak. Chis vhic pucti has w at a

stai at i th ast ca m amst 3 mii

iht ut vhics i 2002 t 17.3 mii ast a, with

pspcts uth st icass i wa. ov

th ast w as, i cic, sat a cmt

staas cas hav b upa siicat, a

with ths upas th is a wi vhics

leAdIng MAnUFACTUrerS SHAre oF IndUSTrIAl FABrICATIon

0

5

10

15

20

25

30

201120001990


%o

fTotalIndustrialFabr

ication

China JapanIndia

Europe United States

CHIneSe SIlVer FABrICATIon

(mii ucs) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

ectica a ectics 17.1 18.8 21.0 23.5 25.8 31.5 35.5 31.3 38.4 40.0

Bai As a Ss 12.2 14.4 15.8 17.8 18.8 20.7 25.4 25.9 28.0 29.9

oth 8.4 9.4 10.4 11.6 13.6 15.3 17.1 15.8 18.0 18.7

Tot 37.7 42.6 47.2 52.9 58.2 67.5 78.0 73.1 84.4 88.5

Suc: Thms ruts gFMS


18/26

18


with ctica a ctic cmpts t ct,

xamp, chassis mvmts, sti, cmmuicatis,

cmt a sat vics. Mst imptat, thuh,

csums a icasi mai vhics with th

hihst spcicati vs su, cimat ct a

uctia autmati (such as ctic mis a hat

sats). A umb ths mus us siv-ctaii

cmpts, such as thick m ik tacks switchs/

ctacts. This mais a smt that has iv

si wth (i tm siv tak) i th ast ca

a shu ctiu t xpa as th mstic cm

avacs.

Ath sct that is wth hihihti is th tab is

i Chias phtvtaic (PV) pucti capacit, which has

sut i a su i ma siv past. Itsti,

athuh ba sa-c pucti is w havi

cctat i Chia, th mstic PV iust has,

ma as, i impt siv pw (picipa

m th Uit Stats a Japa), u t stit

quait quimts. Whi this ctius t b th cas,

m ct w hav s th mstic pucti

siv pw th ca PV iust is. I u viw,

this susts that Chis siv abicati th PV

iust wi stat t is appciab, as pps t th

cut situati, wh th us impt siv past

ctibuts t Chis siv iustia csumpti, ath

tha its abicati ma.

BrAzIng AlloyS And SolderS

Chis ma bai as & ss has as

pst a twth icas v th ast 10 as. Fm

12.2 M (380 t) i 2002, Chis tak m tha

ub v th 2000s, hitti a w c hih 29.9

M (929 t) ast a, with its ctibuti t th ba

tta isi m 29% t 48% v th sam pi.

Cucia t this has b st mstic gdP wth

a w ab csts, which tth hav ctibut

twas Chia bcmi th ba mauactui hub

a vast umb pucts, such as whit s.

Mawhi, isi icm vs a api ubaiati

ma that a wi sha th ppuati (abit sti

cmpaativ sma) a puchasi whit s a

th hm appiacs. T iustat th sca th whit

s makt, pucti hush iats a

washi machis jump b m tha 440%, a 320%

spctiv btw 2002 a 2011.

Whi xpt ma has su i ct as u

t p cmic citis i k wst cutis,

pucti whit s i Chia has maa t

maitai hath wth, thaks t a sis avab

cmic picis auc b th Stat Cuci i at

2008. Spcica, th hush appiacs ta-i

a hm appiac i t th cutsi pams,

bth i pac btw 2009 t 2011, hp t bst

ma, spcia i ua aas. dspit ths stimuus

pams cia ishi at th ast a, th

hm-appiacs-subsi sstm has b xt i

sm pvics, which has s a hp t kp pucti

at simia vs t ast a. Hwv, whi Chis

ma m this sct is st t ctiu v th

tm, th i wakss i ma k xpt makts,

a with a is m ct i ta stcks, ps a

tmpa wsi isk t th sct i th a utu.

eswh, iastuctu cstucti, such as i

xpasi a aiwa ivstmt, has as ctibut

t wi siv ma. Withi th mstic Chis

makt, i cstucti has uubt a

cmic wth. I a, a siicat amut

pw is at i ca-ich is th cut,

ath tha aas that a cs t hih a cts. Th

tasmissi sstm iia cat was pa t

CHIneSe lIgHT VeHICle ProdUCTIon

V

ehicleproduction,

Index2001=100


0

200

400

600

800

1000

201120092007200520032001

CHIneSe WHITe goodS ProdUCTIon

Ve

hicle

production,

Index2001=100


0

100

200

300

400

500

600

700

201120092007200520032001

Refrigerator

Washing machine


19/26

19


cv cticit v mat istacs. Hwv, as

cmic wth accat ivstmt i th atia

i ai t kp pac. As a sut, th mais

csiab scp wth i siv ma i this aa.

dma bai as a ss as civ

a bst wi th api vpmt i husi

cstucti i th sc ha th 2000s. nvthss,

as a stat pics su i ct as, this pmpt

as a pssib ppt makt bubb. This i tu has

sut i vmt ts t c th sct, icui

hih mta w-pamts a stictis

i t vps, which has impat a staii

ifuc pivat sct ivstmt. Psitiv, this has

b st, i pat, b st vmt spi

scia husi. This is a umb vpmt

bjctivs tai u th w Fiv ya Pa a, as a

sut, is xpct t ctiu t suppt th cstucti

sct v th cmi as.

oTHer APPlICATIonS

I tms ma siv us i th iustia

appicati, this has w v th ast 10 as, with

ma isi m 8.4 M (260 t) i 2002 t 18.7 (582 t)

i 2011.

Simia t th t s i ma ctica &

ctics a bai as & ss, wth i th

iustia aas was upi b th stth th

mauactui sct i Chia, its a sut bmi

mstic csumpti a sui xpt ma. I

paticua, it is t that siv us as a catast i

th pucti th xi (eo), us pimai t

puc m th c, has impv ct.

That sai, whi Chia ss a xpasi i th

c pats, th siv xi qui ths sits wi

ctiu t b iv m vsas suppis, a as

such wi tpica cut aaist Chis siv iustia

csumpti ath tha its abicati ma.

PhotograPhy

I kpi with ts i phtaphic ma swh,

Chis tak i this aa has wak ticab

v th past ca s. last a, th us siv i

phtaph is stimat t hav a t just 2.4 M

(74 t) at paki i 2004 at 6.1 M (190 t). I tms

th picipa aas siv-at ma, spit

th wi ppuait pht bks, w xpct t s a

uth ci i ma csum pap u t th

wi miac bth itt-bas pht-shai

a hm ik jt c piti. Hwv, aa wh

th taitia siv-bas tch is sti us is i th

mica sct. I act, th iust was iv a bst with

th itucti Chias 2009 hathca m pa,

which tat impvmts i w- ua pima

ca. Pat ths ms icu upati quipmt

at hathca aciitis a, as a sut, th was tab

wth i th ma cvtia x-a tchis

i ua aas. Hwv, a citis hav ctiu t

av iita quipmt, wh w ctiu t s a shit

awa m siv hai-bas sstms.

Whi th us siv-bai m i csum

appicatis is a cii t, th ma m

i th cmmcia sct appas t hav is mst

i ct as. Mv, ithaphic appicatis, us

wi i aphic ats a piti patis, mai a

aa vpmt with ma busisss ctiui

t apt siv hai tchis (i shap ctast t

wst makts) as th miati t iita is i a

a as bi t cst.

Fia, th Chis mti pictu iust has

xpic a pi api wth sic th vmt

ba asi uatis i 2001. I pat, th sct has

bt m th xpasi i th umb thats.

B th ast a th umb scs i citis

atiwi ha xc 9,200, whi th umb

cimas ach 2,800, u t th xpasi i w uba

cts acss th cut. Whi th vast majit ths

w istaatis bast iita tchis, it is stimat

that th m taitia siv hai m was ituc

it au 10% this tta.

CHIneSe PHoTogrAPHy deMAnd

0

1

2

3

4

5

6

7

8

201120092007200520032001

Millionounces



20/26

20


Jewelry

Chis siv jw abicati has u a

siicat mtamphsis v th ast ca which has

vtua t th Asia iat bcmi th ws

ast abicat. l b a sui cm, which has

iv ava aua gdP wth v 10% v this

pi, mstic csumpti siv jw has is

shap. I aiti, Chis abicats hav as ivst

havi i tch t bui a hath xpt ta,

miati th w cst smt, as w pucti

csts hav pvi acia avata v ma

taitia ivas.

It shu b t that Thms ruts gFMS Chis

stimats bth jw a sivwa i 2011, a

i th back sis, hav b ais sic th

pubicati World Silver Survey 2012. Th cmmissii

this pjct has aw at cus th Chis

makt a w imati uath ui

sach visits this a has cssitat a thuh viw

u stimats a cacuatis. Th wi aasis is

bas ths vis umbs.

I 2001, Chis siv jw abicati tta 14.1

M (438 t). Csumpti was miat b a buk

taitia itms that w t basic i si a a

sv k cbatis ik a biths wis.

outsi ua is, siv was iitia t hih

a. Whi siv jw (a sivwa) has a

taiti i Chia, it has mai b i th p ua

aas th cut that siv has b puchas. Uba

Chis (spcia i st a sc ti citis) w

uctat t chs siv, pi a patium

jw v siv sis.

I th pi 2001- 2005, aua Chis siv jw

abicati wth ava a stai 21%. Th

abicati ct Pau i guahu pvic as

a sut w api as ma abicats (ma m

H K) mv thi patis t this ctai

mauactui hub. Csumpti was wi api,

athuh it was th xpsi i xpts that was th

mai ctibut t th is. F istac, xpts

siv jw t th Uit Stats (th ast csumi

makt) m tha ub ui this v a pi,

whi i ctast, shipmts t that cut m Ita

sipp b amst a thi.

Chis abicati ma ui 2006-2011 ctiu

t bui as a sut uth xpt ais a sta

wth withi th mstic makt, with aua wth

v th pi avai a hath 13%. I aiti,

Chis tak ctiu t bt m act

catis m iustiai cutis a icasi

m suthast Asia ihbs, attact b th w

ab a ppt csts. B 2006, xpts t th

Uit Stats ha pak (at m tha 15 as

uitupt wth) but th th sipp amst 30%

m this pit t ast as v, havi batt with

sui siv pics, cmptiti m th w cst

pucs, a phaps m imptat, a US cssi,

which saw csum spi a amatica. Hwv,

whi xpt ma was taki a hit, csumpti i

Chia was avaci api as csums (spcia th

uth maphic) w attact b th w t pit

cmpa t th isi cst bth a patium.

Accptac siv jw as a atativ t its m

xpsiv cusis was iitia imit t st a sc

ti Chis citis wh pmti was atst. yu

atis hav k t siv (mai hium

pat sis) as it pvi th k whit

patium at a a w pic pit. I th ast w as,

siv jw has j at xpsu acss th

cuts iti bsti th custm bas a xpsi

csums t th w cst atativ. Chis abicats

a upicati ppua sis ma u i 18-caat

whit i th m aab whit mta t attact

w bus.

Th upaa Chis cmic wth that has

stimuat ubaiati i th ast w as is ath

k as wh siv jw ma has ctiu t

sa at such a st at. I, isi icms vs

a a api xpasi tai utts acss th cut

hp xpai th a 17% aua wth witss i

CHIneSe SIlVer JeWelry FABrICATIon

0

10

20

30

40

50

60

201120092007200520032001


0

5

10

15

20

25

30

35

40

Millionounces

Annual growth in

jewelry demand

%


21/26

21


bth 2010 a 2011 as at xpsu t th mta

siicat bst csumpti.

lki aha, w xpct t s uth wth i

jw abicati vums i cmi as. oi

ubaiati shu u th xpasi tai utts a

it th xpsu siv as a ashi jw atativ.

Icas makti is ik t bui awass a w

xpct t s at mphasis pac up ba

pucts spcia i th a citis wh th uth

maphic a m ba cscius. eswh, wh

tast is t as , ma w pic ashi

jw shu ctiu t iv abicati vums

hih. Fia, xpt s a as ik t pickup with

th vtua cv wst cmis which i tu

shu iv uth ais i Chis jw abicati

sm tim t.

Silverware

Chis sivwa abicati has as xpa at a

bust at v th ast ca. At just 3.5 M (108 t) i

2001, ma has w at a aua ava at

11% i th ast 10 as, thb m tha ubi t a

stimat 8.3 M (259 t) ast a. This pacs Chia as

th sc ast sivwa abicat ba bhi

Iia.

This wth has cm at tim wh sivwa ma

ba has su m a pi tm stuctua

chas, with ba csumpti 48.5 M (1,510 t)

ast a amst 60% bw th 1997 pak. This scua

cha has a b a ucti scita chas

i Iia a a ui shit i puchasi habits i

wst makts. I Chia, hwv , abicati has

btt m isi mstic csumpti a its w

mauactui a ab csts which hav cua

i abicats i hih ab cst is (mai i

th iustiai w) t cat t Chia t ai this

avata. Ths i patships bst xpts

a ituc w tchis which hav s th

quait ish Chis pucts is siicat.

I th ast w as, ma i k wst makts

has c paticua shap cis as hih a

vati siv pics hav cmbi with th cssia

cmic citis t cutai isctia spi.

A t this has b a ctiuati scita ts,

such as csums th mvi awa m ma

ttaii a it ivi sivwa as a taitia

wi pst. Chis xpts sivwa hav b

a casuat ths wak makts with ict shipmts

m Chia a via H K (as th cuit mst us

t ship t itatia makts) cii as a sut.

nvthss, a spit th i eupa cmic

cisis, Chis sivwa abicati has maa t

bu st i th ast w as at si u

i 2008 a 2009 t c a hath ai i 2010 a

aai ast a, avai 10% wth ths as. This

psitiv utcm was i stak ctast t ba ma,

which tat 13% a 9% spctiv this pi.

Whi xpts hav pick up m ai ws it has b

th mstic makt that has iv ths vius

ais a is ik t pvi th patm utu wth.

dmstic sivwa csumpti was c pimai

iv b ma m ia Chia wh hav pai

taitia itms with cutua mtivs w t iv

at imptat ccasis (at a bith, xamp). Ths

as, hwv, csumpti is bi aumt b a

isi mi cass (a ucti th api avaci

cm) which i tu has t at ma

tabwa i uba hushs a siv itwa

which has w substatia as th cst itms has

is shap. This itwa smt th iust has

s api xpasi i th ast tw as a is xpct,

i u viw, t ctiu, ivi uth ais i 2012

a b. I, Thms ruts gFMS cast

that Chis sivwa abicati wi ist hath

ais sva as as a bust cmic vimt

stimuats mstic sas am a at ppti

th ppuati.

CHIneSe SIlVerWAre FABrICATIon

0

2

4

6

8

10

201120092007200520032001

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5. silver investment demand in China

Invstmnt man silv as pst a spctacla

incas in Cina in cnt yas. Fm a maginal play

jst a w yas ag, Cina as alay bcm t wls

laing makt bt pysical invstmnt an pap

taing silv ts an t simila cntacts.

Retail investment

T Cins tail invstmnt makt as bn

taitinally minat by ict pcass an sals

silv cins, wit invstmnt in pysical bas nly bcming

availabl in Jly 2009, wn stictins w lit by

t gvnmnt. Givn tat silv cins sl in Cina a

gnally cmmmativ in nat an t attact

a ig pmim, invstmnt man, altg n a ising

tn, as bn lativly mst v mc t 2000s.

As mntin abv, in Jly 2009, t cnty intc

its st v invstmnt pptnitis silv bllin

bas. Sinc tn, bas w intc in a vaity sizs,

anging m 200g, 500g, 1kg, 2kg tg t 5kg, ac

wit a pity t 9s, an all sbjct t 17% VAT.

T st ll ya at libalizatin t invstmnt

makt, nt man silv bas an cins m tan

bl, ttaling 9.8 Mz (305 t), qivalnt t almst

$200 millin. By 2011, ts a gs sa t 17.0 Mz

(530 t) an sm $600 millin spctivly. T pt tis int

a wi pspctiv, Cins invsts last ya accnt

8% glbal nt pcass silv bas an cins.

Mv, pctatins a tat t gwt is in t

piplin t yas t cm as lcal savs pt ti tst

in pcis mtals as a st val an infatin g.

Makt libalizatin was als accmpani by a massiv

spply si pansin in t Cins pcis mtals

makt, gl in paticla, wit silv bing a maj

bnciay. T nmb lcal banks activ in t

mstic makt climb m jst in 2005 t a

cnt ttal m tan 20. An, ac ts banks

as incas t nmb bancs tat bllin

pcts t t pblic. In aitin, jwly tails av

als vt an incasing amnt cnt spac t

s-call git bas tat a sl at ig pmim an in

sm cass av als bgn t sll lw-magin invstmnt

bas t ti cstms.

Nt spisingly, gwt in Cins silv invstmnt in

cnt yas can nly patly b plain by t spply

si acts. Citically, ts av bn spplmnt

by a maj ps m t man si. In st,

maccnmic cnitins in Cina an aba av

ncag an plsin in lcal pcass pcis

mtals. Fist, Cinas ig sl savings at mans

tat mstic invsts av a gat al cas tat

gntly ns t n a m. Scn, invstmnt ptins

a still at limit, in pat bcas still immat

mstic nancial makts bt als in n small mas

t stict ign cang cntls. Ti, m

cntly tw t mst av stinatins lcal

savings av bcm lss attactiv: T ppty makt

as bn vlatil an cntls av bn implmnt t

stain spclatin an t stck makt as sn avy

lsss. Ft, llwing t massiv liqiity injctins in

2009, t last tw yas saw infatin is t a wyingly

ig lvl vn n t cial mas tat sm bliv

was t cnsvativ. Fit, intst ats savs av

main lw an, in act, a cls t z in al tms.

An, nally, n sl nt nstimat t stimls

t invstmnt man givn by a ising tn in t

intnatinal lla pic silv, wic as nly sligtly

bn c by t yans gains in cnt yas against

t Amican cncy. Manwil, silvs impssiv

pic gains an its cap nit pic cmpa wit gl

pvi a t bst t invst cnnc.

Lking aa, it is pbabl tat pysical silv

invstmnt man will cntin t fis in Cina, at

last wil t cnitins scib abv main in plac,

wit tis sppt by t pansin n t spply

si tat will impv t availability bllin pcts

lcal invsts.

reTAIL INVeSTMeNT IN ChINA

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Coins & Medals

Bars


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Commodity exChanges

Alng wit gwing pysical invstmnt man, intst

in pap pcts ta n mstic cangs as als

pan apily in cnt yas. At t mmnt, t a

t cangs tat silv taing in Cina.

ShANGhAI WhITe PLATINuM ANd SILVer exChANGe

Fllwing t libalizatin t silv makt in Cina,

t hatng Nns Mtal Wlsal Makt was

givn clsiv igts t ta an manag t pysical

silv makt in 2000. In 2003, t hatng cang was

sps by t Sangai Wit Platinm an Silv

ecang (WPSe), wit t latt tn bcming t nly

cially signat silv tansactin makt in Cina.

T at, t aily pic by t WPSe as alay

bcm a ky bncmak bys an slls silv

bllin in Cina. Altg pivat invsts can ta n

t WPSe via t cangs mmbs, inmatin

sggsts tat t vwlming majity tnv n t

cang as bn lat t cmmcial activitis. Tis

lagly plains t lativly mst gwt in tnv n

t WPSe in cnt yas, paticlaly cmpa wit t

Sangai Gl ecang (SGe) an t Sangai Fts

ecang (ShFe) w gwing invst intst as l

t a sg in silv taing vlms.

ShANGhAI GoLd exChANGe

on octb 30t 2006, t SGe lanc tw silv

cntacts, namly Ag999 pysical silv an Ag(T+d)

cntacts (ctivly a ts cntact). As can

b sn in t cat blw, taing n t SGe main

sb ntil mi-2010 wn silv pics stat t

climb matially ig. Ftm, wispa mia

cvag pcis mtals n stat n tlvisin,

ising awanss silv as an invstmnt tl amng

t gnal pblic an an incas in t nmb

cmmcial banks ing bkag svics w als

imptant t t psitiv tcm. In paticla, silvs

gat vlatility tan gl, bt its still cls clatin,

cmmn it t ts w ga silv as a m

lvag altnativ t gl.

As a slt, aily avag tnv jmp tnl m 2.1

Mz (66 t) in 2009 t 22.5 Mz (700t) in t nal qat

2010. As pics cntin t stngtn, tis sv

t inc pic pctatins, wic was fct in a

t lit in SGe taing in t st v mnts 2011.

By May last ya, aily silv ts tnv a, t

st tim, c 60 Mz (1,890 t). dspit a maj

all in taing vlm tat, invst intst as

main igtn ya-t-at by istical stanas.

Mv, as t silv pic stat t cv m lat

Agst nwas, t last w wks av sn a api pick

p in silv taing vlm n t SGe. Mving wa, as

t silv pic is pct t pst signicant gains v t

nt 12 mnts s, tis may wll stimlat ant wav

invst intst n t SGe.

ShANGhAI FuTure exChANGe

T ShFe lanc a silv cntact n May 10t tis

ya, wit a stana taing nit 15 kilgams/lt, a

aily pic limit 5% it si t pvis ays

sttlmnt pic an a minimm magin qimnt

7%. T st v mnts patin av pv

vy sccssl, as igligt by ttal taing vlms

17,436 Mz (542,306 t) tg t n-Nvmb.

Ftm, wit an avag aily tnv 123.7 Mz

(3,846 t), t ShFe as alay bcm an imptant

cmmity cang silv ts taing n a glbal

basis, nly at Cm. Lking aa, t pspct

t gwt in taing vlms n t ShFe mains

pmising, paticlaly i t cang cis t intc

a nigt taing sssin.

SGe TurNoVer ANd oPeN INTereST ShFe TurNoVer ANd oPeN INTereST

0

30

60

90

120

150

Jan-12Jan-11Jan-10Jan-09Jan-08Jan-07

Source: SGE

Openinterest(millionoun

ces)

0

20

40

60

80

100

120

Turnover(millionounces)

Open

Interest

0

50

100

150

200

250

300

350

400

OctSepAugJulJunMay-12

Source: SHFE

Openinterest(millionounc

es)

0

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Turnover(millionounces)

Open

Interest


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24


6. silver imports and exports

As silver recvered rm imprted ccetrates is

discssed i detail i Chapter 3 this reprt, this chapter

will ly address Chiese silver imprts ad eprts i the

rm blli ad semi maactred prdcts.

Bullion imports and Exports

Aalyzig Chias silver blli ws i the last decade

has bee made ar easier sice the liberalizati the

Chiese silver market at the begiig the 2000s whe

the gvermet eded its 50-year mply sales ad

prchases silver. This chage delivered a trasparecy

that previsly did t eist, with blli ws (bth

imprts ad eprts) te previsly paqe de t a lack

reliable data. Fr istace, i the late 1990s, fcial

metal ws were te accmpaied by sigifcat ws

fcial shipmets, which made btaiig a clear

pictre tre demad a difclt assigmet. There

remais a degree fcial ws tday, thgh these

have dimiished ver time.

As illstrated i the chart ppsite, Chiese silver blli

shipmets have bee dmiated by eprts r mre tha

a decade. The blk these eprts were recrded as

gig t Hg Kg, althgh mst this was destied

r re-eprt prpses, primarily t Idia ad ther

ctries i East Asia sch as Thailad, Idesia ad

Taiwa. Basis r calclati, fcial blli eprts

rse rm belw 64 Mz (2,000 t) i 2001 t a peak

ver 155 Mz (4,800 t) i 2006. Despite a sbstatial all

thereater, blli eprts remaied cmrtably abve 35

Mz (1,100 t) last year.

Iterestigly, while Chia was e the mst imprtat

silver blli eprters t the iteratial market

thrght the 2000s, fcial imprts silver remaied

a gig eatre the market ver the same perid,

albeit a limited magitde. This rather cris state

aairs was primarily related t qality isses. I may

cases, certai idstrial sers silver, especially reig

peratis with striget qality reqiremets, had t

brig metal i despite this beig mre epesive tha

srcig lcally i the ctry.

Lkig at the drivers behid the srge i eprts rm

2002 t 2006, this was iitially drive by the liberalizati

the Chiese silver market, as a grwig mber

dmestic cmpaies were give the licese t eprt silver

blli, thgh ttal vlmes were still cstraied by a

eprt qta issed by the Miistry Cmmerce that was

reviewed a aal basis. I 2000, r eample, ly

r eprters were grated eprt qtas ttalig 13.5

Mz (420 t). By 2005, this had grw t 128.6 Mz (4,000

t) via mre tha 40 eprters.

Frthermre, there is e imprtat allwace t make

whe assessig the large vlme Chiese silver eprts

i the middle part the 2000s. Chiese silver prdcers

ad traders hldig fcial eprt qtas at times ejyed

a 13% VAT rebate based the vale the silver eprted

as per the shippig dcmetati. This icetive was

eplited by etities that shipped silver t Hg Kg

i rder t claim the VAT red, ly r the silver t

the be smggled back t the mailad. This lphle

sigifcatly iated the tre eprt fgre r a mber

years i the mid-2000s. Fr istace, Thms Reters

GFMS estimate that as mch as 150-160 Mz (4,670

4,980 t) was ivlved i this activity which ths reslted

i a verstatig the tre size Chiese silver eprts

rm 2003 t 2008.

Ater the VAT rebate was redced rm 13% t 5% i Jly

2007 ad the was elimiated i Agst 2008, blli

ws rm Chia t Hg Kg drpped dramatically as

the icetive t rd trip the metal was largely remved.

Blli eprts, thereater, ell csiderably, as r

estimate shws that vlmes ttaled 37.9 Mz (1,178 t) last

year. Imprtatly, the demise the VAT scheme is t the

sle driver r the declie i eprts witessed i recet

years. Perhaps a greater actr has bee dmestic prices

persistet premim ver iteratial prices, which has

redced the icetive r idstry t eprt. Frthermre,

CHInESE BuLLIon IMPoRTS AnD ExPoRTS

0

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Imports Exports


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25


a rapidly epadig dmestic market (r jewelry,

silverware, ivestmet ad idstrial demad) has limited

blli ws t the ctry.

Trig t this year, Chiese blli eprts have remaied

at lw levels year-t-date, as weaker silver prices,

particlarly cmpared with recrd highs i 2011, have

see may lcal silver prdcers relctat t sell their

silver blli. T ed-octber (latest data available) grss

eprts were dw by ver 30% year--year ad are likely

t be well belw 33 Mz (1,000 t) r the ll year.

sEmi-manufacturEd and industrial silvEr

shipmEnts.

Chiese imprts semi maactred silver have bee

icreasig ver the last te years as idstrial tpt has

ctied t epad. Demad r silver sed particlarly

i the area phtvltaics has see tremeds grwth

with a large prprti the silver pwder ad pastes

sed i this brgeig idstry beig imprted rm the

uS, Japa ad Taiwa. Reviewig the Chiese imprt

data cfrms this epasi, with silver pwder imprts

a decade ag still cmrtably belw 2.6 Mz (80 t)

( a calclated basis), gradally icreasig i the mid

2000s, ad the ballig t ver 19.3 Mz (600 t) i

2010 as abricatrs ramped p prdcti aggressively i

aticipati strg demad i 2011.

Hwever, abricati demad eased back slightly last year

(imprts pwder slipped t 14.2 Mz (433 t) ater the

glbal spply chai was verladed with ecess ivetry.

The verspply i the market cased a sharp drp i

mdle prices, which led t several high prfle casalties,

primarily Wester cmpaies that were able t cmpete

csts set by Chiese maactrers. Mrever, despite

sme attriti dmestically Chiese tpt accted r

almst 60% glbal slar cell prdcti last year.

Lkig t this year, silver demad r phtvltaic

abricati remais smewhat mribd, largely de t

the ecmic climate i the Erze, with demad r

fished mdles remaiig st. Dmestically, demad

has remaied rbst thgh the declie i eprts has

bee tellig, with imprts silver pwder rm uited

States (a gd pry r the stregth the idstry)

weaker by 38% t ed-octber (the latest available data).

Lkig briey at semi maactred eprts silver

(which ca take the rm wires, grales, silver plate ad

semi fished chai amg a myriad ther applicatis),

these have als icreased sbstatially ver the last

decade. Chiey de t the epasi the idstrial ad

jewelry trade (bth a cti the advacig ecmy

ad the massive ivestmet i these sectrs) eprts

related gds der this tari have rise i silver ctet

terms rm small levels i 2001 t ver 6.4 Mz (200 t) at

their peak i 2006 accrdig t available trade w data.

Sice the peak, eprts have tailed , with the glbal

ecmic slwdw ad assciated redcti i demad,

impactig abricati tpt. Eprts last year slipped

belw 1.9 Mz (60 t) a calclated basis ater hldig

steady ard 3.2 Mz (100 t) sice 2008.

CHInESE IMPoRTS oF SILVER PoWDER

0

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20

201120092007200520032001

Millionounces



26/26

Thomson ReuTeRs GFms

30 st Clad

T T Rtr Bildig

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Dirct: +44 (0) 207 542 1682

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The sILVeR InsTITuTe AnD Thomson ReuTeRs - DeCemBeR 2012

All rigt rrvd. Rpblicati r rditribti T silvr Ititt ad

T Rtr ctt, icldig by raig r iilar a, i pribitd

witt t prir writt ct T silvr Ititt ad T Rtr.

T Rtr ad t T Rtr lg ar tradark T

Rtr ad it afliatd cpai.

Wil vry rt a b ad t r t accracy t irati iti dct, t ctt ti dct i prvidd witt ay garat,

cditi r warrati a t it accracy, cplt r rliability. It i t

t b ctrd a a licitati r a r t by r ll prci tal, rlatd

prdct, cditi, criti r rlatd facial itrt. T t xtt

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Any liability for any direct, indirect or consequential loss or damage incurred by

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Rad r abt r prdct at:

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Fid t w t ctact yr lcal fc:

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the chinese silver market 2012

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