Stunning One-Day Decline In Shanghai Futures Exchange Silver Inventories

In a surprising update, the Shanghai Futures Exchange reported one of the largest single-day withdrawals of silver off its exchange today.  As of yesterday, the total amount of silver stored at the Shanghai Futures Exchange (SHFE) was 256 metric tons (mt).  If we look at the chart below, we can see how the SHFE silver inventories grew slightly over the past week and then dropped significantly today :

Shanghai Futtures Exchange Silver Stocks Aug 19

From Aug 12th to Aug 18th, the silver stocks at the SHFE increased a mere 5 mt, from 251 mt to 256 mt.  However, in just one day, silver inventories fell a whopping 23 mt to 233 mt today.  This was nearly a 10% decline of total silver warehouse stocks at the SHFE in a single day.  If we convert 23 mt to ounces, it turns out to be 739,450 oz.  That’s a lot of silver.

For the individuals who want to see the real proof of the data, here is the actual screenshot from the Shanghai Futures Exchange website:

Shanghai Aug 19 Screenshot

These figures are stated in kilograms, which converts to 22.8 mt.  I just rounded the figures to 23 mt.  Furthermore, you will notice the larger 20 mt withdrawal came from the Zhongchu Wusong warehouse.  Even though total SHFE silver inventories declined nearly 10% today, the majority of it came from the Zhongchu Wusong warehouse.  Thus, the Zhongchu Wusong warehouse suffered a 40% decline of its silver inventories in one day (50.9 mt to 30.9 mt).

Now compare this to how much was taken off the COMEX yesterday:

COMEX Silver Inventories 081815

Here we can see that the COMEX reported a total 675,541 oz silver withdrawal yesterday.  Even though this is a pretty nice size withdrawal, it was less than a 1/2% of total COMEX silver inventories.  So, the single-day 739,450 oz silver withdrawn from the SHFE was even larger than the 675,541 oz removed from the COMEX.

For whatever reason, investors in China have been withdrawing silver from the Shanghai Futures Exchange at an increased pace ever since the warehouse inventories peaked at 394 mt on June 15th:

Shanghai Exchange Silver Stocks Jan-Aug 2015

So, in a little more than two months, the SHFE silver stocks have declined a whopping 41% from 394 mt (June 15) to 233 mt today.  We have seen the same kind of decline at the COMEX Registered Silver Inventories, but over a longer period of time.

The chart below (from Sharelynx.com) shows the decline of COMEX Registered from a peak of 70.6 Moz at the end of March to 55.8 Moz currently.  This was a 21% decline (15 Moz) in a little more than four months:

COMEX Registered Inventories Aug 19th

For those who do not understand the difference between Eligible and Registered Inventories, here is an explanation taken from Jesse’s Cafe Americain site:

The eligible category means that the silver is in a condition that conforms to the standards of delivery. Size and quality of the bar in other words. It is being stored at the Comex warehouse, but is not offered for delivery into contracts.

Registered means that the silver is available for delivery to those who demand bullion by being registered as such with a bullion dealer, in addition to being in a fit condition to satisfy the contract.

Eligible silver can become registered and deliverable if the owner of the silver declares it saleable at some price. And of course if it is there, and otherwise unemcumbered by senior obligations or conspicuous absence.”

Investors need to realize something has changed in the silver market ever since financial turmoil increased significantly due to a possible Greek Exit of the European Union in the middle of June.  Even though we are not seeing a massive shortage of silver on the wholesale market, that could arrive overnight.

I will be putting out an article on the upcoming global silver shortage at the end of this week.  I encourage investors to check it out as it will try to explain how quickly global silver supplies could dry up… virtually overnight.

If you haven’t checked out THE SILVER CHART REPORT, there’s a great deal of information on the Silver Industry & Market not found in any single publication on the internet.  There is one chart in this report (Chart #19) that I can guarantee that 99.9% of precious metal investors haven’t seen before.  

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14 Comments on "Stunning One-Day Decline In Shanghai Futures Exchange Silver Inventories"

  1. Steve,

    Around the same time last year, Shanghai Futures Exchange Silver inventories were at an all time low of 148 and we all thought there will be some kind of imminent default due to inability to deliver on the exchange, though it quickly recovered and we forgot about it all, it looks like the same thing is happening right now and it’s still about 100mt above last year’s low, so what is different this time?

    • This guy has a great point SRSrocco. I’d be interested to see your response to this?

    • Walter,

      Actually the SHFE silver inventories fell to a low of 81 metric tons in September 2014. Maybe some analysts were saying there would be a default on the SHFE, but I wasn’t one of them. I look at the data as INDICATORS of the market. GFMS who puts out the World Silver Surveys and data for the Silver Institute stated the big drop in SHFE silver inventories was due to domestic producers holding onto their silver for better prices. Well, better prices did not come around.

      So, the SHFE had a build of silver inventories towards the end of 2014 and onto 2015. Well, we continue to see lower prices, but now we have a decline of inventories. I believe the reason we are seeing a decline in Exchange silver inventories across the globe is due to a huge increase of physical investment demand. This is much different than prior years.

      Investors must keep an eye on these Exchanges as they will give notice to when serious shortages will begin.

      steve

  2. The Chinese people have lost confidence in the stock market and have started buying precious metals again. The global financial system is under its highest level of stress and cracks are appearing everywhere!

    • There is what the Chinese people buy, and what the government buys. I doubt anyone has accurate numbers on either. Some who lost confidence in the Chinese stock markets are now not in a position to buy another asset class; they are hurting from their losses.

  3. I am a precious metal dealer and I have never seen supply as tight as this in the last 5 years. I am having to wait up to 8 weeks(mid October) to receive SMI products who also are a major supplier of silver blanks to the US Mint.
    We also know what may happen in October and if it does, who knows what price silver will reach and if you can get it!

  4. FYI silver is shipped around the world in lots of 20 tonnes in sea containers (their max capacity), so when you see figures in multiples of 20 tonnes it implies physical movement. Generally 20 tonnes is not a big volume in the wholesale market, but % wise is a big drop for SGE as you say.

    • Bron,

      Thanks for the info. Bron brings up a valid point. However, I do see the current retail-wholesale situation as a much different SYMPTOM than what took place in 2008, 2013 & 2014. I will explain in my article to be posted tomorrow.

      steve

    • The amount of silver at the exchange in Shanghai is quite small. Looking at that and trying to extrapolate physical silver availability in the world, and thus price, seems a bit of a stretch. It didn’t work too well at the end of last year.

  5. The reality of what’s driving economic activity and commodity consumption down…

    The 2015 young and core (0-64yrs/old) annual global population growth is approx. 63 million…but only 4 million of that growth is in the “consumer” nations (34 OECD nations + China, Brazil, Russia). The 59 million remainder of the 0-64yr/old growth is in the ROW (“rest of the world”)…India, Indonesia, Africa, and M. East nations that consume relatively little compared to the West.

    OECD + C,R,& B 0-64yr/olds population will begin outright declining in the next couple years…and become progressively more negative thereafter. And the ROW 0-64yr/old annual growth will decline year in, year out from here.

    Check the link for the demographic reality behind the coming breakdown…

    http://econimica.blogspot.com/2015/08/depression-does-not-come-close-to.html

    What I’m showing is that growth is not coming back in our lifetimes and using debt to buy time until growth picks up is beyond stupid…it is economic suicide. One of the only ways to protect your savings is likely the constant in the equation where debt is the ever increasing variable attempting to make up for collapsing consumer demand.

    • High consumer nations population growth is flatlining and the ROW (rest of world) low consumer nations (rest of world) population gains are slowing…the current 10yr period we enter represents about an est. 45% decline in new consumption from the previous 10yr period. By the time we get to ’25-’34, est. net new consumption drops by 90%+ due to significant declines among high consumer populations not adequately offset by low consumer growth.

      http://econimica.blogspot.com/2015/08/population-growth-will-never-be-fix-to.html

      The engines of global growth are ceasing and headwinds are really picking up…and all CB’s and governments have to offer is more debt and QE…

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