At the beginning of 2026, demand for silver in China reached such a level that metal import in the first two months jumped to an eight-year high. According to customs statistics, the country imported more than 790 tons, of which almost 470 tons were in February – a record figure for that month. High demand has led to local prices significantly exceeding world prices, and warehouse stocks have rapidly melted.
The beginning of the year was extremely volatile. Silver rose about 70% on a wave of speculative demand from China and other regions, and then sharply lost its gains in late January. However, import data shows that physical consumption in China remains stable.
Demand is formed by two powerful flows. Retail investors are buying up bullion, seeing silver as a more affordable alternative gold. The second line is solar panel manufacturers, who have accelerated purchases before the abolition of export tax incentives from April 1. The Chinese solar industry, where most of the world’s power is concentrated, consumes about a fifth of the annual silver supply.
Demand for physical bullion is extremely high, and inventories on Chinese exchanges continue to decline. The main flow of metal goes through Hong Kong, where traders are actively using arbitrage opportunities. While large bars usually trade at a discount to the London price, in the first two months of the year in Hong Kong they were sold at a premium of up to $8 per ounce.
Surprisingly, rushing demand from China has not yet caused serious disruption in London. Silver is flowing into the global trading hub at a record pace following last year’s shortage. In addition, global inventories in exchange-traded funds have fallen by more than 1,900 tons since the beginning of the year, freeing up additional volumes.
According to experts, the market in London is behaving calmly, despite large-scale demand from China. For the first time in recent years, such volumes do not lead to serious price distortions and disruptions. The cost of borrowing silver has fallen, although long-term contracts are still more expensive due to ongoing volatility.
Visible inventories on major exchanges from New York to Shanghai are either declining or remain well below long-term average levels, indicating a general shortage of metal in the system. In response to this, the popularity of investment bars of small weight – from 20 grams to a kilogram – is growing. In Shuibei, Shenzhen’s precious metals retail hub, silver has become a hot seller.
Traders say silver has become an affordable alternative to gold, which many buyers now consider too expensive. At the same time, dealers have increased their inventories: according to some estimates, the total volume of silver in Shui Pei has tripled in recent months, to 300 tons. Cheap bullion requires less working capital, which makes the business more sustainable.
In the near future, the excitement may cool down a bit. The Chinese premium has fallen and demand from solar panel manufacturers has slowed as the tax deadline approaches. But experts warn that once prices start to rise again, trend-following retail investors may return and a new wave of demand will follow.
Source: Bloomberg
