Silver imports from China soared 270 per cent in 2017 with the vault facility becoming fully functional at Sri City Free Trade Warehousing Zone near Chennai. China accounted for 65 per cent of India’s silver imports in the year.
In 2017, the country’s silver imports doubled to 5,677 tonnes from 2,794 tonnes in 2016. In 2016, China was the source market for 35 per cent of the imports or 977 tonnes. In 2017, silver originating from China went up to 3,621 tonnes, or 65 per cent of the pure silver imports of 5,572 tonnes. Around 105 tonnes of the total imports had come as concentrates and dore, according to the data from GFMS, the precious metals agency.
“Last year a significant change in the silver trade flow emerged as 82 per cent of the imports were routed through the Free Trade Warehousing Zone (FTWZ) which is located near Chennai. The convenience of clearing from here and its proximity to East Asian countries made it the most popular way to import silver. Thus it wasn’t a surprise when 65 per cent of the silver imports originated from Greater China,” said Sudheesh Nambiath, lead analyst, Precious Metals Demand, GFMS, South Asia and UAE.
India’s first metals vault in a Free Trade Warehousing Zone had opened in 2016 and operations became full-fledged in 2017. According to Samir Hosangady, managing director of Brinks India, which runs the vault facility in Sri City, banks have been using the facility to stock duty-free imported metals. “If they have to import by ship it takes at least 45 days to bring the metals from places like Europe. Air freight is costlier. Banks can now ship the duty-free metal and keep it in the vault and the customer can procure it without much delay,” he said.
According to Nambiath, Chinese government allows export of 4,500 tonnes of VAT-free silver, which is procured as a byproduct during the refining process of base metals. China otherwise has 17 per cent VAT on primary silver if an Indian importer wants to buy it from the Chinese market.
Mostly the banks procure the VAT-free silver and stock it in the vault. This has brought down the premia on silver by $3 to $4 per ounce in the Indian market. Easy availability of silver from the Sri City vault and lower cost were two main factors that have increased imports from China in 2017.
Further, due to the favourable currency movement in Yuan, local price of Chinese silver was on the lower side in 2017. Russia and UK, which historically have been two major suppliers of silver to India, shifted to a distant second and third spot with a market share of 13 per cent and 12 per cent respectively. In 2016, Russia had share of 31 per cent and UK 20 per cent.