Silver imports likely to pick up pace after falling over 63% in 2023

High prices and previous year's base weighed on the precious metal

India’s silver imports crashed more than 63 per cent in calendar year (CY) 2023 to 3,475 tonne, down from a record 9,450 tonne the year before but traders expect demand to return in 2024.

The fall looks steeper on the higher base of 2022, when silver imports increased 241 per cent year-on-year. However, note that in CY 2020 and 2021 little gold and silver was imported due to lock downs to contain the spread of Covid-19. The backlog led traders to stock up silver at lower prices and then prompted imports in 2022.

India imported 1,829 tonnes of silver in October 2023, the highest in a month since 2013. Rest of that year, only 1,645 tonnes were imported.

“Silver is a price sensitive commodity; its demand and imports increase when prices are low to moderate. It (imports) fell as silver price in Indian currency went up significantly in 2023,” said Viraj Didwania, director at Foresight Bullion India. The year 2022 was not normal because “it followed two years of low demand and low imports due to lockdowns,” he said.

From a low of Rs 46,000 per kg in August 2022, silver prices hit a record of more than Rs 68,000 in April 2023 and remained above Rs 55,000 for most of 2023.

India’s annual silver demand is 6,000 tonnes, according to trade estimates. Silver jewellery has the largest share for that demand – of about 35 per cent. It is followed by investment (26 per cent), industry (20 per cent), and silverware (18 per cent), according to estimates. As industry demand is stable, other segments make the difference in overall demand.

Precious metal experts estimate that in 2023 India’s silver demand was met by import of 3,475 tonne: Around 800-1,000 tonnes of carryover stock and domestic supply of around 800 tonnes.

However, the Indian market saw a 40-45 per cent decline in investment demand in 2023 due to high prices. Decline in demand from jewellery and silverware fabrication segments also weighed on overall demand.

India’s silverware offtake in 2023 was the lowest since 2012, said a report by London-based research firm Metals Focus.

Chirag Sheth, principal consultant at Metals Focus, said silverware is a popular gift item in India but due to higher prices “there was a significant reduction in average weights.”

“In 2024, we believe the silverware segment will grow by 13 per cent as discretionary spending, incomes and some moderation in local prices are likely to push demand. We expect the jewellery sector to grow by 10 per cent year-on-year as consumers become more accustomed to higher silver prices and ongoing economic strength aids the recovery,” he said.

With gold hallmarking, Indian consumers have become conscious about purity and this will result in higher demand for sterling silver (92.5 per cent silver content, 7.5 per cent other metals like copper). Silver investment demand is price sensitive and recovery depends on price stability.

“The young generation is increasingly moving towards silver jewellery as they are not comfortable with wearing the same gold jewellery for years together. They prefer regular change and keep exchanging for new designs and hence they prefer the cheaper option of silver jewellery,” said Didwania

Any pullback in rupee-priced silver could attract buyers waiting for an opportunity to enter the market. Sheth said, “Investment demand in 2024 is expected to rise by over 20 per cent and industrial demand by 4 per cent.”