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Commodity
SILVER
Description | Overview | History | Grading of silver | Silver producing countries | Indian silver market | Major trading centers  
Description


Silver is a white colored shiny element that is highly ductile and malleable and is used in making jewelry, coins and tableware. It is also used in chemical experiments as it provides a high electrical and thermal conductivity. It is found in the metallic state and also in a large amount of minerals mainly in argentite. That is why it is called argentum in Latin.

Overview


Silver is a metal that is associated with metals like gold, lead, zinc and copper, though it’s unusual properties makes it very different from them. It is used in making various kinds of jewelry, as it is considered as a precious metal second to gold but its contribution in the various industrial sectors as a raw material makes it unmatchable. No other metal can replace silver as it has an endless number of uses.

 

Silver is produced throughout the world but an interesting fact remains that the primary source of silver is not the silver mines but the other sources of silver. Silver mines produce a small amount of silver that is 25% of the world’s total production and the rest of it is derived as a by-product from gold mines (15%), copper mines (24%), lead and zinc mines (34%) and other sources. The total production of silver in the world figures to be around 615 million ounces and Mexico is the leading silver producing country. The total demand of silver in the world amounts to be around 29 thousand tons. About 95% of this demand is contributed largely by three industrial sectors namely photography, jewelry and silverware sectors. The idea of silver as a holding asset and as a source of coinage is losing popularity to the idea of silver as an industrial commodity. The demand of silver in 2002 from these sectors was: -

 

  • Photography sector – 342 million ounces

  • Jewelry sector – 205 million ounces

  • Silverware sector – 259 million ounces

The countries that are the major consumers of silver are: -

 

  • United states

  • Canada

  • Mexico

  • United Kingdom

  • France

  • Germany

  • Italy

  • Japan

  • India    

History

Silver is one of the oldest found metals on earth and it had been used in jewelry and utensils since 4th millennium B.C. Old books indicate that at that time it was extracted from lead. First attempt to mine silver is said to be have been made around 3000 BC in the areas of Anatolia. A process, ”culpellation” was found out in order to extract silver from silver ores around 2500BC. This led to the discovery of more silver mines around the world.

 

It was used as currency in many civilizations. Silver coin as a currency was first introduced in the eastern Mediterranean in 550 B.C. It started gaining popularity as a medium of exchange since then. The discovery of the American countries marked an important twist in the history of silver as the major silver mines in Mexico, Peru and Bolivia were found.

 

There have been important technological improvements till now, which have resulted in the increased production of silver and have made it an unmatchable commodity.

 

Grading of Silver

Silver that is found with some percentage of other elements in it is called impure silver. That is why it is graded upon its fineness. According to the Indian standards, silver is graded into six categories

Grade 9999 9995 999 970 925 916
Fineness 999.9 999.5 999 970 925 916


Silver producing countries
 
  • Mexico (99 million ounces)
  • Peru (98.4 million ounces)
  • Australia (71.9 million ounces)
  • China (63.8 million ounces)
  • Poland (43.8 million ounces)
  • Chile (42.8 million ounces)
  • Canada (40.6 million ounces)
  • United States (40.2 million ounces)
  • Russia (37.9 million ounces)
  • Kazakhstan (20.6 million ounces)
  • Bolivia (13.1 million ounces)
  • Sweden (9.4 million ounces)
  • Indonesia (8.6 million ounces)
  • Morocco (6.3 million ounces)
  • Argentina (5 million ounces)
  • Turkey (3.7 million ounces)
  • South Africa (3.2 million ounces)
  • Iran (2.6 million ounces)
  • Japan (2.4 million ounces)
  • India (2.1 million ounces)

The above-mentioned figures are the silver production figures of the countries in 2004. Clearly, Mexico leads the list of silver producing countries. It contributes to about 15% of the world’s total production. As already mentioned, only 25% of the world’s total production (i.e. 615 million ounces) comes from the primary silver mines and the rest from other sources like refining of other metals and also from scrap recycling. World silver survey done in 1998 depicts that around 152.2 million ounces of silver was separated from the waste for recycling purposes. This percentage of separated silver has improved due to advanced methods of separation. United States is the major silver producing country through scrap and waste followed by Japan.

Production of silver in India

 

India hardly produces any silver and is basically a silver importing country. It holds the 20th place in the list of silver producing countries and the total production of silver in India in 2004 was around 2.1 million ounces. The three major silver producing states in India are: -

  • Rajasthan
  • Gujarat
  • Jharkhand

Rajasthan is the leading silver producing state in India with a production of around 32 thousand tons. Gujarat follows on the second place with a production of around 20 thousand tons.

 

Indian silver market

 

As mentioned above, India is primarily a silver importing country, as the production of India is not sufficient to satisfy the ever-growing domestic demand. The production of silver in India stands out at the figure of around 2.1 million ounces placing it at the 20th position in the list of major silver producing countries. The import of silver in India hovers over 110 million ounces that shows the huge size of Indian domestic demand.

 

However, this import level fell sharply as a result of the decline in demand due to rise in silver prices and inconsistent monsoon on which the income of the rural sector depends. But, even this sharp decline could not affect India’s reputation of being one of the largest consumer countries of silver in the world. India stands third after United States and Japan among the leading consumers of silver in the world. The countries from which India imports silver and maintain the flow of silver in the market are: -
  • China
  • United Kingdom
  • European Union
  • Australia
  • Dubai

Over 50% share of import of silver in India is held by Chinese silver. The major importing center of silver in India was Mumbai but now it has been shifted to Ahmedabad and Jaipur due to high sales tax and octroi charges.

Market influencing factors

 

  • Price movements of other metals

  • Income level of the rural sector of the economy

  • Available supply verses Fabrication demand

  • Fluctuation in deficits and interest rates

  • Inflation


Major trading centers of silver

 

  • London

  • Zurich

  • New York (COMEX)

  • Chicago (CBOT)

  • Hong Kong

  • Tokyo Commodity Exchange (TOCOM)

In India, silver is traded at the following places

  • Delhi

  • Indore

  • Rajasthan

  • Madhya Pradesh

  • Mathura (Uttar Pradesh)

  • Rajkot (Gujarat)

Also, silver is traded in the Indian commodity exchanges like National Commodity & Derivatives Exchange ltd, Multi Commodity Exchange of India ltd. and National Multi Commodity Exchange of India ltd

 
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