Silver Stockpile Slump in China: A New Risk to an Overheated Global Market

The global silver market is confronting a fresh challenge as China’s domestic stockpiles fall to their lowest level in a decade. Recent data show that inventories tied to China’s major exchanges have thinned significantly, coinciding with record exports of silver heading toward London—one of the world’s most important trading hubs for precious metals.

Shrinking Stockpiles and a Surging Export Wave

Warehouses connected to the Shanghai Futures Exchange are now holding the smallest silver reserves since 2015. Meanwhile, volumes on the Shanghai Gold Exchange have fallen to their lowest in more than nine years. A major factor behind this drawdown is the extraordinary level of exports: in October alone, China shipped more than 660 tons of silver, the highest monthly volume ever recorded.

Analyst Zijie Wu of Jinrui Futures notes that the tightness stems largely from rising exports to London, combined with continued industrial and fabrication demand in China. According to Wu, this strain on supply could ease within a couple of months, though the market remains under pressure today.

A Market Already on Edge

Silver has experienced an exceptional year, with prices soaring 80% to reach new records. This dramatic rise was fueled by gold’s broader rally and speculation that the Trump administration might impose tariffs on silver. Such a tariff would make imported silver more expensive in the United States, potentially trapping already-imported silver within the country and tightening supply elsewhere—especially in London, where liquidity has already been strained.

Daniel Ghali, a strategist at TD Securities, warns that a tariff introduced while Shanghai markets are still recovering from earlier supply drains could have significant consequences for global availability.

This tension is visible in China’s own market structure. Near-term silver prices in Shanghai have risen above longer-dated contracts—a condition known as backwardation, which typically signals immediate supply pressure. With low inventories and relatively inflexible silver supply, analysts remain wary.

Rising Demand From Solar and Retail Shifts

Beyond exports, China’s domestic demand is also rising. The photovoltaic industry—one of the biggest consumers of silver—enters its seasonal peak in the fourth quarter. Wu explains that solar installations typically accelerate during this period, putting further strain on supply.

An unexpected policy change has also played a role. A new tax reform ended long-standing input VAT rebates on certain forms of off-exchange gold. This shift pushed some retailers—particularly in Shenzhen’s Shuibei precious-metals hub—to move more aggressively into silver, especially if they were already active in the silver market. According to Liu Shunmin of Shenzhen Guoxing Precious Metal Co., many merchants are now uncertain about pricing gold under the new rules and have temporarily increased their reliance on silver instead.

International Perspective: Liquidity Concerns and Speculation

Outside China, the silver market is also facing liquidity challenges. Despite a surge of metal flowing into London, borrowing costs remain high. The market is further complicated by silver’s recent addition to the US Geological Survey’s list of critical minerals, prompting traders to watch for any policy moves from the United States.

Ghali suggests that much of London’s current silver demand is driven by speculation rather than industry, and notes that exchange-traded funds have not shown major redemptions even after prices cooled slightly from their peaks—indicating strong investor conviction.

Still, some analysts are cautiously optimistic. Ghali points out that China may still hold significant off-exchange inventories—unofficial or “invisible” stockpiles. While the size of these reserves is uncertain, backwardation could eventually encourage some of that metal to return to formal exchanges.

Conclusion: A Market at a Crossroads

China’s silver stockpile slump represents more than a local supply hiccup—it highlights how interconnected and sensitive the global silver ecosystem has become. Export surges, shifting tax rules, industrial growth, and geopolitical speculation are colliding to create one of the tightest physical markets in recent memory.

As the year progresses, the world will be watching whether China’s unofficial inventories, easing export flows, or changes in policy can stabilize the market. Yet in a landscape shaped by energy transitions, trade tensions, and evolving financial strategies, silver’s story is increasingly one of resilience and reinvention.

The current squeeze may prove temporary, but it also serves as a reminder: in the modern economy, even a metal long overshadowed by gold can suddenly become a flashpoint of global significance.