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Albert Sung is the author of Correlation Economics, monitoring breaking economic news on a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at Ashland, a... More
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  • How Much Does It Cost To Ship Silver And Gold? 18 comments
    Jan 4, 2014 11:06 AM | about stocks: GLD, SLV

    By now you all know the premiums in Shanghai for silver are 6%. The question is: "Why isn't SLV being raided and sold to the Chinese?". Is it too expensive to ship it over?

    Shipping gold and silver costs money. 80% of that money is insurance, so I'm going to neglect the actual shipping costs.

    I found an interesting post here.

    To ship 100 oz. gold, requires 4 packages, because you can only insure so much at one time, not more than $25,000 worth. $45 each package.

    Total cost to ship 100 oz. of gold = $45 x 4 = $180

    To compare, it costs $20 to ship 100 oz. silver; $8 for the one box, and $12 for the insurance. Insurance is much less, due to the lower value.

    Gold is 9 times as expensive as silver to ship, on an ounce per ounce basis at current prices, and more inconvenient, due to having to break down the packaging into 4 boxes.

    But what about on an equivalent dollar basis, as Antal was saying?

    What does it cost to ship $100,000 worth of silver verses $100,000 worth of gold?

    In the real world, you can actually fit 7 silver bars in one bucket, to save on packaging costs.

    7 silver bars x 6.8 pounds each (12 ounces per troy pound, 16 regular ounces per regular pound, but 14.6 troy ounces per regular pound) = 47.6 pounds, which is well under the 70 pound limit for the Post Office for heavy packages.

    Each package of 7 bars costs about $65 each to ship.

    5600 ounces / 700 ounces = 8 buckets.

    8 buckets x $65 = $520 to ship, which is about half the cost of shipping each bar by itself.

    $520 / $180 = 2.8! Much less than 15, much less than 56!!!

    100 oz. gold x $876/oz. = $87,600, which costs $180 to ship. (Or .2 of 1%)

    5600 oz. silver x $15.83 = $88,646, which costs $520 to ship. (Or .6 of 1%)

    Silver costs about 2.8 times as much to ship, as gold, considering equal dollar amounts, and both can be shipped for much less than 1% of the cost of the metal itself.

    So this means that shipping silver costs 3 times as much as gold for $100,000 worth of the physical metal.

    And it costs $180/100 oz gold and $520/5600 oz silver (in 2008).

    Let's calculate it for 2013.

    1) gold:

    100 oz gold = $120000. We need 5 packages or $45 x 5 = $225 to ship gold.

    2) silver:

    7 bars = $65 shipping costs. 6000 ounces / 700 ounces = 8 buckets.

    8 buckets x $65 = $520 to ship silver.

    Conclusion: in 2013 it costs $225/100 oz to ship gold and it costs $520/6000 oz to ship silver. Shipping silver costs twice as much as shipping gold for $120000 worth of the physical metals.

    Now comes the fun part.

    I know that the Shanghai price of silver is 6% higher than the SLV price of silver. Will it be a good idea to ship over this silver to China and sell it there?

    Let's sell 100 tonnes of silver to the Chinese, which is about $75 million. I get my money and now I buy SLV with that money. It costs only $71 million in London. Then I take delivery and ship it to the Chinese. It would require 5039 buckets. Shipping costs are $383594 (80% insurance, 20% shipping).

    My profit would be $3.8 million with a 5% profit margin at the 6% silver premium. If the silver premium goes back under 1%, then I will lose money.

    Looks like a great deal to me. I have no clue why this raid on SLV isn't occurring. I'm unaware of other costs like warehousing, fees, handling and taxes though... And shipping 5039 buckets is a bit too much for me to handle though.

    This also reminds me of eBay, people sell stuff there at very high prices. Sometimes the item gets sold (by a dumb buyer), then the seller gets the money and buys the product cheaper from somewhere else and sells it to the dumb buyer. Then the seller gets to receive the arbitrage margin as profit.

    EDIT: It seems that silver shipped from Hong Kong to China has 17% value added tax, while gold doesn't. That's the reason why nobody is shipping silver to China, only gold. And that's why SLV is non-raidable unless China removes the VAT.

    Stocks: GLD, SLV
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Comments (18)
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  • REIT
    , contributor
    Comments (261) | Send Message
     
    other costs could be testing the metal, transportation for distribution, security costs involved with trasfering large amounts of precious metals to customers, bookkeeping, corporate tax, income tax, staff to handle the business by the time you add all this
    I don't think you can make money

     

    internal control and security will be costly

     

    the only reason why people are not doing it becouse there is no money in it.... nice try :-)
    4 Jan, 11:27 AM Reply Like
  • Katchum
    , contributor
    Comments (548) | Send Message
     
    Author’s reply » Indeed, there is VAT on silver, while no VAT on gold.
    4 Jan, 02:08 PM Reply Like
  • REIT
    , contributor
    Comments (261) | Send Message
     
    why only silver and not VAT on both ? is it becouse silver industrial metal and gold is considered not ? interesting why many governments don't tax people on gold they tax almost everything else including winnings from gambling so why gold is exempt?
    4 Jan, 02:26 PM Reply Like
  • Katchum
    , contributor
    Comments (548) | Send Message
     
    Author’s reply » try this: http://bit.ly/1lHavjF

     

    Gold to Hong Kong zero tax: http://bit.ly/1lHatbI
    4 Jan, 02:30 PM Reply Like
  • REIT
    , contributor
    Comments (261) | Send Message
     
    thanks for the links I will save them

     

    very interesting, but why do some countries say the US not add sales tax what benfits for countries adding or not.

     

    or is it diffcuilt to control gold sales, or gold is money and you already paid for it with after tax money that is money already taxed once . so they don't want to make double taxation

     

    but why not they can tripple tax and people will not know

     

    also if you noticed some countries producing gold they do have the the sale tax
    4 Jan, 02:50 PM Reply Like
  • omarbradley
    , contributor
    Comments (966) | Send Message
     
    "these are not the droids you are looking for."
    4 Jan, 11:33 PM Reply Like
  • REIT
    , contributor
    Comments (261) | Send Message
     
    I don't think you can transfer large amounts of PMs in a taxi so you will need security trucks, drivers, guards company to run the business then uniforms, training , pension plans, insurance for the PMs once it reaches destination and during distribution to customers who will bare the risk you need to insure again

     

    I'm no expert but doesn't look attractive business also you will need sales team to sell the metals once it reaches HK, still there are times you will be stuck with the metal nobody wants it

     

    so you have to do contracts with buyers to lock in the price, then add hedging, before you finsih you have a large corporation running the business so you will need overhead costs and rent a place for the ligit biz,

     

    advertising for your biz so customers know your company is a good reliable supplier of PMs and with good repetation need to work on PR and then more money

     

    you will need staff to place orders in UK and manage things so now you have multi national corp taxes differ in each country you will need full team of accountants, tax experts

     

    or where you planning to do all this by yourself I wounder ?..
    4 Jan, 11:38 AM Reply Like
  • Stilldazed
    , contributor
    Comments (2144) | Send Message
     
    Be much easier to sell to a PM dealer in HK. Order the metals and have them drop shipped to the dealer. Sell wholesale, not retail.
    4 Jan, 12:50 PM Reply Like
  • Katchum
    , contributor
    Comments (548) | Send Message
     
    Author’s reply » I thought I would just use eBay... :)
    4 Jan, 02:09 PM Reply Like
  • REIT
    , contributor
    Comments (261) | Send Message
     
    Its my +1 like for using eBay :-)
    4 Jan, 02:14 PM Reply Like
  • REIT
    , contributor
    Comments (261) | Send Message
     
    why will the HK dealer need a middle man ( drop shipper ) ? what does he add ? why doesn't the HK dealer buy directly from the UK and save money.
    4 Jan, 01:15 PM Reply Like
  • Stilldazed
    , contributor
    Comments (2144) | Send Message
     
    I don't see any reason for the PM dealer to buy from a middle man. I was suggesting a way to bypass all the other expenses. No one mentioned the possible customs import fees or any other regulatory fees possible on either end from govts either.
    4 Jan, 01:24 PM Reply Like
  • REIT
    , contributor
    Comments (261) | Send Message
     
    conclusion I suggest the author should add at the end of the article we believe only governments will end up making profit from trasporting PMs from one region to another...look else where
    4 Jan, 01:27 PM Reply Like
  • Stilldazed
    , contributor
    Comments (2144) | Send Message
     
    REIT,
    Yeah, it is only going to take Germany 7 years to get some of their gold repatriated.
    4 Jan, 01:34 PM Reply Like
  • REIT
    , contributor
    Comments (261) | Send Message
     
    stilldazed what's your thoughts on gold good time to add or metal doesnt provide income better to look for capital apreciation and income from other asset classes .
    4 Jan, 01:43 PM Reply Like
  • Katchum
    , contributor
    Comments (548) | Send Message
     
    Author’s reply » Dears, it seems that 17% VAT is charged for silver shipment from Hong Kong to China, while 0% VAT is charged for gold shipment from Hong Kong to China. That's the reason why nobody ships silver.
    4 Jan, 02:05 PM Reply Like
  • Stilldazed
    , contributor
    Comments (2144) | Send Message
     
    Reit,
    I have some physical silver, no gold. It isn't an investment in the classical sense, rather more of an insurance against worst case scenarios (I live in earthquake country). I have heard the discussions about how PMs aren't money, however if the infrastructure ( electricity in particular) is down, something will need to be used for barter as most US dollars are electronic, there just aren't enough dollar bills in circulation in a given area and the banks may be closed or have much cash on hand either.
    4 Jan, 02:08 PM Reply Like
  • REIT
    , contributor
    Comments (261) | Send Message
     
    still

     

    I think they may force the metal lower and lower with stronger dollar for a while and keep the stock market from moving up too fast

     

    when you not sure a little of everything won't hurt I hold silver and gold fizy only
    4 Jan, 02:21 PM Reply Like
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