Make Kitco Your Homepage

China’s industrial silver demand to exceed all-time high in 2021; gold consumption to jump 40% - report

Kitco News

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!

(Kitco News) - Metals Focus, a leading independent precious metals research consultancy, reported yesterday that it expects over a 40% increase in gold demand in China this year, while domestic industrial silver demand to exceed all-time high in 2021.

Metals Focus said that gold jewellery sales in China remained encouraging during the week-long National Day holiday. This followed a strong Q3 performance when gold jewellery consumption grew (+32% y/y) for the third consecutive quarter to almost match the Q3.19 total.

Growth in fabrication (+30%) came in slightly lower, due to weaker export orders as well as power cut policies (as some jewellery manufacturers had to reduce operating times), the consultancy noted.

“This buoyant demand has seen the SGE price continue to trade at a modest premium to loco-London prices, which has in turn led to strong bullion shipments to mainland China in recent months,” Metals Focus pointed out.

On top of a low base effect, the growth in gold jewellery sales over the last couple of months also reflects weaker gold prices, which helped to boost demand for heavier plain pieces, the authors of the report noted.

“Buoyant wedding related purchases and gold’s appeal as a store of value have also contributed to this outcome,” the report found.

Going forward, Metals Focus said that many of these positive factors are likely to remain in place, though power supply issues and restrictive measures to curb the spread of COVID during the winter season may restrain the pace of growth in jewellery sales in the coming weeks.

Even so, Metals Focus said it still expects over a 40% increase in gold demand in China this year (which is modestly lower than the 2019 annual total), with further gains projected for 2022.

As for silver demand in China, Metals Focus said that despite some challenges that have all weighed on silver use in many industrial applications in recent months, ranging from consumer electronics to the photovoltaic industry, silver industrial offtake has remained robust in absolute terms, with the 2021 total still on track to exceed 2019’s all-time high.

More importantly, the consultancy pointed out that near-term negative factors should have little impact on silver’s positive demand fundamentals over the medium-to-long term.

For instance, according to the report, ahead of the COP26, the Chinese government released a framework for its path towards peak emissions and carbon neutrality, in which it restated its plan to expand solar capacity, as well as pushing vehicle electrification in the coming years.

Elsewhere, a small decline in smartphone shipments in Q3, this has been largely by the construction of 5G base stations across the country as a shift to 5G network accelerates. Given that China is aiming to achieve full 5G coverage in urban and rural areas by end-2025, this should continue to benefit silver demand, Metals Focus said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.