(Mike Maharrey, Money Metals News Service) While the paper-driven silver price swings all over the place, the Chinese have been gobbling up physical silver.
China imported 790 tonnes of silver through the first two months of 2026, with 470 tonnes flowing into the country in February alone.
As Bloomberg described the situation, “Strong demand has pushed local prices well above international benchmarks, whittling down already-low exchange stockpiles and hoovering up metal from abroad.”
This is happening in a silver market that is already short on metal. The global silver market is expected to run its sixth structural deficit in 2026 as silver investment remains strong.
Based on preliminary data compiled by the Silver Institute, silver demand outstripped supply by about 95 million ounces last year, leading to the fifth straight market deficit. Including last year’s shortfall, the 5-year market deficit will climb above 800 million ounces, an entire year of mining output.
When mine output and recycling fail to meet demand, silver users must tap into existing above-ground stocks. That drives prices higher, as hands holding metal aren’t necessarily keen to give it up.
Silver prices have been extremely volatile, initially gaining about 70 percent to over $100 an ounce before correcting. Recently, we’ve seen prices in the $60 an ounce range. But as Bloomberg noted, “The strong import figures suggest physical consumption in China has been sustained despite shifts in trading flows.”
Chinese demand is two-pronged. Investors are snatching up silver bars. Meanwhile, solar manufacturers are scrambling to obtain metal before export tax rebates expire in April. One analyst told Bloomberg photovoltaic producers are “going gangbuster.”
Solar panel production uses about one-fifth of the world’s annual silver supply, and the industry is heavily concentrated in China.
As demand remains robust, physical silver inventories in Chinese exchanges keep falling. StoneX Group analyst Rhona O’Connell said this has an additional “psychological” effect on market players.
Premiums for large silver bars traded by big banks have been running as high as $8 an ounce in Hong Kong. They usually sell at a discount in London.
Keep in mind that similar displacements of metal precipitated two silver short squeezes that led to significant silver runs.
According to Bloomberg, the voracious appetite for silver in China has not disrupted the London market thanks to a massive inflow of metal after the first silver squeeze.
An exodus of metal from silver ETFs has also taken some strain off the market.
“For the first time in more than a year, the market can face this scale of demand without resulting in significant price dislocations or disruptions,” TD Securities senior commodity strategist Daniel Ghali said.
However, the market is basically playing a game of musical chairs. Shifting silver between New York, London, and Asian exchanges can temporarily ease squeezes, but it doesn’t fix the underlying problem – there isn’t enough silver.
So, what happens when investment demand picks up again, and metal flows back into ETFs?
As Bloomberg summarized it, “Visible inventories tracked by major exchanges from New York to Shanghai are either falling or sitting well below their long-term averages, suggesting metal remains scarce in the broader system. And the market has reason to be worried.”
Guangdong Southern Gold Market Academy researcher Song Jiangzhen noted that retail investors are increasingly turning to silver as the gold price climbs, making it inaccessible for some investors. While the recent correction has dampened enthusiasm somewhat, he said all it takes is another surge in silver prices.
“Retail investors tend to follow rising trends rather than buy dips.”
You might be wise to get ahead of the trends and take advantage of silver on sale.
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
