Silver Prices Fell as Market Interpreted Fed Statement as Dovish, and Power Rationing Has Limited Impacts on Silver Downstream Enterprises

SHANGHAI, Aug 19 (SMM) - At 2:00 a.m. Beijing time on August 18, the Federal Reserve reiterated its decision of slowing down the pace of tightening in the future at its meeting apart from suggesting there was a risk of over-tightening. Fed had displayed a solid resolve to contain inflation with more substantial interest rate hikes, but the market tended to view the statements as dovish. In consequence, the US dollar rebounded in the wake of the meeting and the silver prices fell. On the morning of August 18, the reference price of SMM1# silver on an ex-factory basis for self pick-up was 4,341 yuan/kg, 73 yuan/kg or 1.7% lower than the previous trading day. Given that the price spread narrowed significantly, some enterprises shipped goods at the spot prices.

Due to the peak electricity consumption in summer, Sichuan and Anhui have imposed power rationing this week, which halted the industrial production so as to secure the power consumption of the residents. What is its impact on silver production? At present, two smelters are subject to power curtailment, but according to SMM survey, power curtailment has a greater impact on the production of copper cathode rather than the refined silver. It is because the production of refined silver consumes relatively little power and smelter still have a certain amount of anode mud. Therefore, power rationing has little impacts on silver production. There are two silver power plants located in Sichuan, which are scheduled to suspend the production for 6-10 days, and about 5-10 mt of silver power production will be affected. However, SMM survey suggests that even when the production is halted, these plants are still able to accept orders and sell goods normally as their stocks are sufficient. Therefore, the production and supply of silver powder also remain stable. In addition, some cell producers in Sichuan were also forced to suspend the production, but slurry plants said that they were well-prepared thanks to early notice. As for the enterprise engaged in silver nitrate, silver paste and electrical contacts, they are unaffected because they are not located in the area covered by power rationing. Expect that several enterprises are on a summer break, others basically maintain a normal production.

To sum up, the power curtailment has limited impacts on the downstream silver enterprises, and those that are slightly affected also have informed other related enterprises timely, thus the market supply and demand of silver are relatively stable.