Shanghai Silver Stocks Decline Substantially after Price Take-down

There seems to be an interesting trend taking place in the silver warehouse stocks at the Shanghai Futures Exchange over the past two months.  From May of 2012, when the Exchange started trading silver futures, until the beginning of 2013, silver warehouse stocks grew from virtually nothing to nearly 1,000 metric tonnes.

This can be seen in the table below:

shanghai Silver Stocks 10413

On January 4, 2013, the Shanghai Futures Exchange had a total of 972 metric tonnes in their warehouses.  Even though the warehouse stocks fluctuated during the first four months of 2013, the Exchange reached a total of 1,121 metric tonnes of silver on April 12:

shanghai Silver Stocks 41213

However, something changed after April 12th, when the price of silver was taken down more than $5 in two days trading.  Instead of the Exchange taking advantage of the lower silver price by adding metal to their inventory… quite the opposite took place.

In less than 2 months, the silver warehouse stocks at the Shanghai Futures Exchange fell from 1,122 (mt) metric tonnes down to 765 mt on May 31:

shanghai Silver Stocks 53113

In just seven weeks, 357 metric tonnes of silver have been removed from the exchange resulting in a 32% decline of warehouse stocks.   Now either industrial demand has picked up recently, or investors in China are taking advantage of the lower price of silver.

It does seem quite interesting that silver inventories are declining on the Shanghai Futures Exchange while COMEX levels have remained about the same (165 million oz) since the silver price take-down.

Lastly, according to a recent market survey, 60% of futures experts surveyed by China Finance Corporation were bearish about silver futures traded on the Shanghai Futures Exchange and only 40% were bullish.

If we consider that a higher bearish sentiment normally signals a bottom rather than top, it looks as if the price of silver will be heading higher shortly.

(thanks to judejin for bringing this to my attention)

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10 Comments on "Shanghai Silver Stocks Decline Substantially after Price Take-down"

  1. Maybe the Shanghai Exchange is part of the suppression scheme, whereby once a sell-off is triggered, their silver stocks are drained to satisfy increased demand generated in the West & East. In this manner, Comex levels can remain the same, giving the appearance that LOTS of silver is available to meet demand even in the face of huge increases in demand generated by artificially low prices. Silver bulls are supposed to sell their holdings at this point. Far-fetched, you say ? This is exactly what GLD and SLV were intended to do.

  2. While interesting, the April to May drop in inventory is only about 3 months worth of ASE sales.

    • Greg… valid point. However, when the price of silver was heading towards $50 in May of 2011, Silver Inventories were falling in all of the Exchanges around the world. The COMEX had its inventories fall to under 100 million oz.

      So, I find it interesting that the Shanghai silver warehouse stocks are declining in a so-called Silver Bear Market.

      steve

  3. Perhaps there are two types of non-equilibrium buyers. The first is the fear buyer that doesn’t want to get left out as the prices climb. The second is the bargain hunter who likes a good deal. In the latter case, one would see the inventories increase again as prices stabilize. However, stable silver prices are a bit of an oxymoron.

  4. So what your saying is everyone is taking possession of the physical which is draining the stockpiles?
    Didn’t something similar happen in 2008 before the markets tanked and PM’s made a run?

  5. silver inventory at shanghai futures exchange peaked in march at around 1150 tons. as of yesterday, it was down to 749 tons. 400 tons drop!

    china’s govt sold off its silver stock pile in 1960s(thousands of tons) and during 2000-2006(10000 tons).

    when china’s govt wake up and restock its silver inventory. when govt aroud the world wake up..when US govt wake up…

    by the end of april 2011, my personal accounts had a 50-100 times run and held 1 ton of gold, 50+ tons of silver in futures and options. by the april smackdown, it was all but wiped out. but i’m glad silver got beat down to 20 again, which gave me a chance to repeat the 20-50 run.

    gold/silver has bottomed! so did the gold/silver miners!

  6. should you give me some credit for writing about shanghai silver inventory on your blog first?

    don’t worry. we’re on the same side. keep up your good work!

    • judejin… didn’t you see I mentioned you as the source of the Shanghai Silver Stocks at the bottom of the post?

      steve

      • ah, sorry. i only skimmed the article since i alread know the info.

        keep up the good work!

  7. OutLookingIn | June 6, 2013 at 12:14 am |

    Something to think about when looking at metals is Dr. Copper.

    The TBTF’s headed by JPM own the majority of stockpiled copper, in warehouses through the LME.

    This is a very large amount of copper. Why hoard it? Are they hedging? Attempting to force price up by with holding supply? Do they see an interuption in production? Customers attempting to buy copper have come out with horror stories of wait lists, back orders, red tape, and other such delaying tactics.

    These warehouses are situated around the globe. Chicago, Shanghai, Frankfurt, London…

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