INTRODUCTION

Silver is a brilliant grey-white metal that is soft and malleable. Silver has unique properties such as its strength, malleability, ductility, electrical and thermal conductivity, sensitivity, high reflectance of light, and reactivity. The main source of silver is in lead ore, although it can also be found associated with copper, zinc and gold and produced as a byproduct of base metal mining activities. Secondary silver sources include coin melt, scrap recovery, and dis-hoarding from countries where export is restricted. Secondary sources are price sensitive.

MARKET CHARACTERISTICS
Silver is unique amongst metals due to the fact that it can be classified as both a precious metal and an industrial metal. Today, silver is sought as a valuable and practical industrial commodity and as an investment. Silver is an important element of global monetary reserves. It is an effective portfolio diversifier.

APPLICATIONS
Demand for silver is based on three main factors: industrial & decorative uses, photography and silverware. These three categories together are 77% of annual silver consumption. Silver is used in electrical contracts and conductors, in mirrors and in catalysis of chemical reactions. It is used to make dental alloys, coins etc.

INDIAN SCENARIO
India's silver demand averages 2500 tonnes per year, whereas the country's production was around 206.95 tonnes in 2010. Nearly 60% of India's silver demand comes from farmers and rural India, who store their savings in silver bangles and coins.

GLOBAL SCENARIO
Silver is predominantly traded on the London Bullion Market Association (LBMA) and COMEX in New York. LBMA, as the global hub of over-thecounter (OTC) trading in silver, is its main physical market. Comex is a futures and options exchange, where most fund activity is focused. Silver is invariably quoted in the US dollars per troy ounce.

DEMAND AND SUPPLY

 

Demand: Silverware achieved an increase of 4.6%, owing to stock-related gains in India. Demand for coins and medals surged yet higher from 2008, rising by 20.7% to reach a new record high of 78.7 Moz (2,447 t) in 2009 on the back of strong investment demand. In 2009, implied net investment soared to 136.9 Moz (4,258 t), buoyed by safe haven concerns, which led to strong inflows into both ETFs and physical investment.

DEMAND OF SILVER IN 2009

Silverware Coins & 8% Medals 11% Photography 11% Industrial Application 48%

Jewellery 22%

PRODUCTION

World silver mine production grew by almost 4% or 24.9 Moz. last year to a record 709.6 Moz. Higher mine output from primary silver and gold sector drove the increase. Silver production from lead/zinc mines declined by 4% or 9.2 Moz in 2009. Peru was the worlds largest silver producing country in 2009, followed by Mexico, China, Australia and Bolivia. Global primary silver supply recorded a 7% increase to account for 30% of total mine production in 2009.

SILVER PRODUCTION
2008 Output Primary Gold Lead/Zinc Copper Other Total 199.3 71.4 249.9 160.7 3.4 684.7 % of Total 29 10 36 23 0 2009 Output 213.9 86.7 240.7 165.9 2.5 709.6 % of Total 30 12 34 23 0 Change % y-o-y 7 21 4 3 -26 4

TOP 20 SILVER PRODUCING COUNTRIES IN 2009

RANK 1 2 3 4 5 6 7 8 9 10 COUNTRY PRODUCTION 123.9 104.7 89.1 52.6 42.6 42.2 41.8 39.8 39.2 21.7

Peru Mexico China Australia Bolivia Russia Chile United States Poland Kazakhstan

TOP 20 SILVER PRODUCING COUNTRIES IN 2009

RANK 11 12 13 14 15 16 17 18 19 20

COUNTRY Canada Argentina Turkey Sweden Morocco Indonesia India Gautemala Iran South Africa

PRODUCTION 19.6 17.1 14.0 8.7 8.3 7.7 7.3 4.2 3.5 2.6

WORLDS LEADING PRIMARY SILVER MINES IN 2009

RANK 1 2 3 4 5 6 7 8 9 MINE Fresnillo, Mexico Cannington, Australia Dukat, Russia Gumuskoy, Turkey Uchucchacua, Peru Arcata, Peru Pallancata, Peru San Bartolome, Bolivia Green Creek US OPERATING COMPANY Fresnillo plc BHP Billiton JSC Polymetal ETI, Gumus A.S. Compania de Minas Buenaventura SA Hochschild Mining Hochschild Mining Coeur d Alene Mines Hecla Mining co. PRODUCTION 35.42 33.76 11.80 11.20 10.56 9.54 8.42 7.47 7.46

FACTORS INFLUENCING THE MARKET

Economic events such as national industrial growth, global financial crisis, recession, and inflation affect metal prices. Commodity-specific events such as the construction of new production facilities or processes, unexpected mine or plant closures, or industry restructuring, all affect metal prices. Governments set trade policy (implementation or suspension of taxes, penalties, and quotas) that affect supply by regulating (restricting or encouraging) material flow. Geopolitical events involving governments or economic paradigms and armed conflict can cause major changes.

FACTORS INFLUENCING THE MARKET

A faster growth in demand against supply often leads to a drop in stocks with the government and investors. Silver demand is underpinned by the demand from jewellery and silverware, industrial applications, and overall industrial growth. In India, the real industrial demand occupies a small share in the total industrial demand of silver. This is in sharp contrast to most developed economies. In India, silver demand is also determined to a large extent by its price level and volatility.

SILVER
Symbol Trading unit Quatation/ base value

SILVER  30 Kg.
 

1 Kg Ex Ahmadabad (incl. of all taxes & levies relating to import & customs duty, but excluding sales tax/VAT, any other additional tax or surcharge on sales tax, local taxes & octroi.

Price Quote

SILVER
Maximum order size Tick size Daily price limit Initial Margin
  

600 kg.

Re. 1 per kg. 4%  5%



Special Margin

In case of additional volatility, a special margin at such percentage (as deemed fit) will be imposed on both the buy side and the sell-side in respect of all outstanding positions, which will remain in force for next two days. After which the special margin will be relaxed.

SILVER

Maximum allowable

Delivery unit

For individual client 50 MT for all contracts in silver for all silver contracts combined together. For a member collectively for all clients 150 MT for all silver contracts combined together or 15% of the market wide open position, whichever is higher. 30 kg.

SILVER

Delivery period margin Delivery center Quality specification

   

25% Ahmedabad Grade: 999 and fineness 999 (as per 2112:1981) No negative tolerance on the minimum fineness shall be permitted. If it is below 999 purity, it is rejected.

SILVER MINI

Symbol Trading unit Quatation /base value Maximum order size Tick size Delivery unit

 

SILVERM 5 kg. 1 kg. 600 kg. Re. 1 per kg 30 kg.

 

SILVER MICRO

Symbol Trading unit Quatation /base value Maximum order size Tick size Maximum allowable

   

SILVERMIC 1 kg. 1 kg.

600 kg.  Re. 1 per kg  For individual client 60 MT for all silver contracts combined together. For a member collectively for all clients 300 MT for all silver contracts combined together or 15% of the market wide open position, whichever is higher.

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