Silver imports fall sharply in June

Results in silver inflow slowdown due to preference for gold and reduced industrial demand

June saw a sharp rise in the import bill for gold, along with a fall in silver imports.

In May last year, the Reserve bank of India directed banks not to import gold on a consignment basis, denting inflows in June. This year, there was some easing in the number of entities allowed to import. As a result, gold import surged to $3.1 billion in June, from $1.9 billion a year earlier.

As for silver, data from the Union ministry of commerce shows import declined by 53.4 per cent to $212.8 million (Rs 1,271 crore) from $457 mn (Rs 2,666 crore) in June last year. In volume, imports fell from 579 tonnes last June to 323 tonnes. During the period, international silver prices fell 5.7 per cent, from an average of $21.12 an ounce in June 2013 to $19.91/oz this June.

“Silver imports fell sharply in June due to overall weak sentiment in jewellery markets. Also, the manufacturing sector, which constitutes around two-third of consumption, is facing a slowdown, resulting in lower demand,” said Suresh Hundia, managing director of Hundia Exports, one of the largest importers of silver.

Trade sources say silver import in the calendar year of 2013 was 5,819 tonnes, the highest ever. The previous high was in 2008, when the import was 5,048 tonnes. In this calendar year’s first half, silver imports were 2,882 tonnes, against 2,980 tonnes last year, despite the fall in June. The 2014 import is expected to close at around 5,000 tonnes.

  A Sudheesh Nambianath, senior analyst with GFMC Thomson Reuters, which tracks the bullion trade in India, said: “So far as gold is available in the market, silver import is likely to remain capped, as traders prefer to trade in gold.”

The government was expected to cut the tariff on gold and there were also expectations of the import norms being relaxed. That has not happened. However, RBI permission to star trading houses for import of gold resulted in a higher June inflow. This, as mentioned earlier, seems to have hurt silver imports. The spot premium for gold has also fallen, another reason why gold availability will be better.

The Union finance minister has said till the current account deficit comes under control, restrictions on gold are likely to remain. However, supply has remained smooth and the premiums have also come down, now around $5 an ounce.  On Friday, the spot market standard gold price in this city went up by Rs 80 for 10g to close at Rs 28,260 for 10g. Silver fell by Rs 480 a kg, to close at Rs 45,200 a kg.