Faced with huge arrivals of silver scrap from retail consumers, precious metal traders have started discouraging sellers by accepting the commodity at Rs 1,500 per kg less than the prevailing market price.
Lured by 25 per cent rise in prices in less than two months, individuals from a range of financial backgrounds are queuing up to either sell their old silver items or exchange them with new ones by paying minimum conversion (making) charges.
If the trend continues, the market will face supply glut resulting in a fear of price crash in India despite high prices globally. “In addition to slackening imports, the sale of fresh silver has been almost nil. Therefore, traders are offering Rs 1,500 per kg lower value of scrap silver. Customers are abstaining from active buying in anticipation of a correction in prices which is due,” said Suresh Hundia, president of Bombay Bullion Association (BBA) and director of Hundia Exports, one of the largest silver importer in the country.
In India, however, imports have declined dramatically as retail and individual users have evinced no interest in fresh buying despite wedding season round the corner. The conservative estimate insists about 1,000 kgs of daily scrap recovery in India of the total consumption of about 3000 tonnes.
Haresh Kewalramani, director of BBA and a large trader of precious metals, said, “Many players are accepting scrap silver below Rs 800-1000 per kg less than the current market price.” Silver prices in India jumped 25 per cent since the beginning of this year to close at Rs 23,090 per kg on firm guidance from the international market where economic meltdown has lured investors to park their funds in gold which spilled over to silver as well.
The demand for silver comes primarily from three areas; industrial uses, jewellery and silverware and photography. These industries represent 95 per cent of annual silver consumption.