Silver Ingot Premiums Fluctuate at Highs; How Are Downstream End-Users Responding?

Recently, silver ingot premiums have remained elevated. According to an SMM survey, compared to increases in the absolute price of the metal, the transmission of premium increases is more challenging. Consequently, the high premiums caused by tight supply during October-November significantly impacted industrial processing.

**Key Reasons for Persistently High Premiums**

On one hand, international market factors: a short squeeze occurred in the London silver ingot market in October, coupled with the opening of the export window, leading to "priority export of 30kg silver ingots." This tightened the availability of silver ingots in the domestic spot market, thereby pushing up premium quotes. On the other hand, supplier behavior: most suppliers, due to factors such as cost or inventory, were unable to lower premiums to sell goods, further exacerbating the tight supply situation in the market. Entering November, silver ingot premiums in the spot market did not decrease significantly. Some traders opted to pay deferral fees rather than make physical delivery, resulting in difficulties for bulls on the gold exchange to pick up goods.

**Divergent Acceptance Among Downstream End-Users**

Against this backdrop, the acceptance among downstream end-users shows clear divergence:

* **Large Enterprises:** Typically possessing long-term orders or their own silver ingot capacity, they can somewhat buffer the cost pressure from rising premiums. Therefore, the impact of high spot market premiums on their processing profits is limited.
* **Small and Medium-Sized Enterprises (SMEs) and Spot Order Purchasers:** The high premium on silver ingot prices can only be shared with their downstream customers. However, while end-users can generally accept increases in the absolute metal price, they find it difficult to accept the additional premium in spot transactions. This has led some silver nitrate and silver powder enterprises to reduce orders to avoid larger processing losses, resulting in decreased enthusiasm for raw material procurement. For some silver nitrate enterprises, small customer orders have already seen increases in the spot premium for silver, but they are still constrained by weaker solar cell prices. Some customers ultimately abandon orders due to an inability to accept the rising costs.

**Overall Impact and Outlook**

Overall, the persistently high silver ingot premiums have significantly impacted downstream processing enterprises. Although some companies can mitigate cost pressures through their own advantages, most SMEs and spot order purchasers face substantial cost pressures and procurement difficulties. Looking ahead, as the market's supply-demand relationship gradually adjusts and the macro environment changes, the trend of silver ingot premiums and their impact on downstream end-users still require further observation.