Exclusive: China and LATAM Silver Part 1

Crowding Out the Competition

1. According to Mainland China sources: China is buying unrefined Silver concentrate from LATAM miner/refiners, something infrequently done except briefly during times of acute supply/demand imbalances.
2. From LATAM mining sources: China is paying refined prices for unrefined Silver Concentrate, spending as much as $200 more a ton for each load of material.
3. China is effectively laying claim to LATAM silver before it is refined and crowding out Western buyers by paying higher prices for ore without directly affecting spot price.

Based on these findings, there are serious implications for Silver’s price and accessibility down the road which also raise questions about Silver’s importance as a critical metal in the US.

2- Background: China Wants LATAM Silver

China’s domestic Silver production is in decline, while their industrial demand due to solar panels is soaring. China’s domestic supply shortage was described in a collaborative work with Bai Xiaojun

Peak China Silver: The Looming Silver Extinction Event

China stands among the top five silver consumers globally, with an average annual demand of 6300 tons over the past decade. Startlingly, the United States Geological Survey (USGS) data from 2011-2020 reveals that China's yearly silver mineral production barely reaches 3350 tons, leaving a significant supply gap of approximately 3000 tons to be fulfilled through imports.

• China had been buying more refined silver overseas to make up the growing shortfall
• To ensure Silver supply and meet their growing industrial demand, they are paying a higher price for Silver in LATAM than competing buyers are
• China is in many cases assuming the cost of Silver Concentrate treatment and subsidizing the concentrate vendor for it. In some cases, they are subsidizing more than 100% of Concentrate treatment cost.

China Customs releases Concentrate data monthly...

Silver concentrate. https://t.co/00pQy931wm

— VBL’s Ghost (@Sorenthek) July 29, 2024

An emerging crisis may be manifesting in the front part of the supply chain (Mining>some Refining) involving procurement of raw materials due to: decreasing mine yields, fragmenting global trade from nationalization/mercantilism trends, and growing competitive demand.

In covering the reason for China’s growing Silver demand this was also stated previously.

From China Dominates Solar Silver:

Meanwhile as China grows its influence on the Value-added portion of the supply chain, investors should assume more global drainage of above ground silver leading right to their domestic manufacturing facilities.

China is the world’s largest solar panel manufacturer and controls between 80 and 90% of the global supply chain. Consequently, they have increased overseas acquisition of silver to secure raw materials for it to cover domestic production shortfalls

China needs more Silver to satisfy its manufacturing demand...

①Silver Mining → ② Silver Refining → ③ Silver Powder (High Purity Silver Powder) → ④ Photovoltaic Silver Paste (High Temperature Silver Paste and Low Temperature Silver Paste) → ⑤ Photovoltaic Panels → ⑥ Photovoltaic Modules → ⑦ Photovoltaic Power Stations

How then, are they getting it?

3- China’s Trade Negotiation Style

China’s approach to securing natural resources is well known in LATAM.

They have sought and secured raw commodity supply for in things like Grains and Oil for years using a simple premise: Find what the seller needs beyond payment for the commodity, and get it for them. Build trust by negotiating each deal in good faith. They try to add value to the deal if they can in creating longer term business relationships.

Here are two known examples from personal experience.

4- Trinidad and Tobago: From Oil to Infrastructure

Since 2010 China had been openly courting Trinidad & Tobago for their Oil. Visitors back them reported to this author stating they saw “more Chinese than locals” 1on the islands. These were businessmen cutting deals with T&T for Oil in the early days of the Belt and Road Initiative that also included infrastructure development. Today, these nations share a full blown trade relationship

“The signing ceremony at the second China-T&T Investment Cooperation Forum.” In photo is Ambassador Fang Qiu, third from left, Senator the Honourable Paula Gopee-Scoon, second from right, and Minister in the Ministry of Agriculture, Land and Fisheries, Senator the Honourable Avinash G Singh, far right.

5- Argentina: Yuan for Dollars

During the Argentine peso crisis in the early 00’s and beyond, it was China who rode to the rescue offering much-needed dollars to the cash strapped country for its Soybeans essentially playing a large role in rescuing Argentinians central bank. Gradually over the years Yuan were added to the mix in their deals. Now, as of August 2023, Argentina is paying IMF dollar loans back with Yuan on loan from China

For the first time, it met a payment obligation with the International Monetary Fund (IMF) in Chinese yuan worth the equivalent of one billion US dollars, with a further $1,7 billion disbursed in Special Drawing Rights, considered the IMF’s currency as it is a reserve asset made up of a basket of the world’s main currencies.

Shortly after this China and Argentina announced a new bolder deal in which China would loan Yuan to Argentina to help its central bank remain liquid

China boosted Argentina's access to the yuan under a currency swap deal.. Argentina's president said the country can now tap $6.5 billion worth of yuan, up from $5 billion.. The move comes as Argentina seeks to prop up its peso, which has tumbled amid economic turmoil.

 

China knew what Argentina (still) needed, and gave it to them in return for more favorable trade status. Now they are doing it in Silver all over LATAM according to two sources on opposite ends of the Silver supply chain and separated by the Pacific Ocean

6- Part 2 Preview: How They Do it

Continues here