Precious metal is recycled into bullion as ‘reliable investment.’

The continued rise in silver prices is driving India to recycle old silver jewellery into bullion an a more reliable way to invest, a trend which threatend to limit imports of the metal in the world’s fourth largest consumer.

The global jewellery industry has seen rpcies rise by almost half this year, with prices peaking to a 31-year high after a gain of more than 80 percent in 2010. The rise in silver price has outpaced gains for gold, where India is the world’s top consumer.


"People are diversifying their portfolios," said Suresh Hundia, chairman of Mumbai-based silver trader, Hundia Exports, one of the country’s largest private silver refiners. "Now they have to have silver in their portfolios."

But, Hundia adds, the rising demand was unlikely to mean higher imports. "Imports will remain steady at last year’s level. Lots of silver has been coming from recycling. Though demand for bars has risen sharply, consumers are not buying silver jewellery", he explained.

Indian investor demand pushed up annual silver imports by 136 percent last year to 3,030 tonnes, but this came off a low base in 2009, when a drought hit farmers’ incomes, metals consultancy GFMS says.

Silver imports hit a record high of 5,048 tonnes in 2008, GFMS data shows, before slumping to just 1,285 tonnes in 2009. India depends on overseas supplies to meet about 70 percent of its consumption, more than half of which goes into jewellery and silverware.

Imports for 2011 are predicted to rise by 10 to 15 percent, said Prithviraj Kothari, president of the Bombay Bullion Association (BBA). "Silver imports could rise by 10 to 15 percent in 2011, but a lot would also depend on the monsoon, volatility and prices," he said.

Silver recycling from scrap has risen sharply in the south Asian nation. Supply of silver from recycling was 558 tonnes in 2010, a jump of nearly 2.8 times from the 2001 figure of 200 tonnes, GFMS data showed.

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