Double Holiday + Silver Prices Hitting New Highs, Silver Nitrate Production May Drop Sharply in October

According to SMM's understanding, the sharp rise in silver prices in late September led to cautious ordering by some end-users, while some silver nitrate producers took early holidays, resulting in a 6.9% MoM decline in silver nitrate production in September.

Regarding processing fees, a silver nitrate enterprise revealed to SMM that the processing fee in September had already hit its lowest point. Downstream customers generally requested credit terms; under such conditions, the processing fee could be maintained at 18-20 yuan/kg. However, if credit terms could not be provided, the processing fee had to be further reduced to 15-16 yuan/kg, close to the cost price. Additionally, due to the sharp rise in silver prices in the short term, some enterprises had to make multiple margin calls to avoid forced liquidation of their hedging positions.

During mid-to-late September, as raw material procurement costs increased, the already narrow processing profit margin was squeezed again, leaving little room for further reductions in the processing fee. As a result, the silver nitrate processing fee stabilized in September, showing no continued downward trend. However, multiple sales managers did not expect a rebound in processing fee negotiations after the National Day holiday, anticipating that it would be difficult for silver nitrate processing fees to recover in the short term.

Entering October, silver nitrate producers in many regions planned to suspend production for holidays lasting 6 to 8 days, indicating that orders originally scheduled for delivery during the holiday period had been handled either in advance or postponed. Some individual producers might delay the delivery of certain October orders due to concerns over inventory risks amid high prices. Overall, the post-holiday market lacks sufficient orders to support silver nitrate producers in increasing production. Based on current holiday arrangements and preliminary estimates, SMM predicts that domestic silver nitrate production in October may continue to decline by approximately 100 to 150 mt due to reduced operating days and voluntary production cuts.