Chinese Government Provides a New Silver Lining

By Brad Zigler China's legendary demand for industrial metals has been a boon to commodities bulls, even as dark clouds are starting to form on the horizon. Helpfully, the Beijing government is now providing a silver lining.

Yesterday, China announced it had lifted silver import restrictions, ending mandated central bank approval of shippers. Silver producers, you're now free to move about the country.

But silver? An industrial metal? Why, yes. Photographic materials are the greatest consumers of silver, followed by electronics, brazing alloys and solders, batteries, jewelry, tableware and mirrors. (See the Hard Assets University article, "Precious Metals".)

Mexico is the largest silver producer, followed by Peru, Australia, the United States and, oddly, China.

China's on both sides of the silver trade. Beijing imported about 151.3 million troy ounces of silver in the first 10 months of 2007. Almost all of it, however, was brought in on a tolling basis in which buyers import the metal and re-export products.

Maybe that accounts for the poor market reception given news of the easing of import restrictions. January COMEX silver ended 9.8 cents lower at $14.335 per ounce yesterday.

Earlier this month, silver prices hit their highest levels since January 1981. The December contract topped out at $15.83, but has since slid in ragged trading.

Comments

[omooc]

Why add the word "oddly" before China (among silver producers)? For a long time, China used silver as the legal tender. When Britain was unable to locate enough silver to trade with China, it used opium instead, which eventually led to the opium war. omooc