Silver prices felt in Indian sarees and sweets

At the Bengali Sweet House in the centre of New Delhi, business is brisk, with its silver-covered multi-coloured “barfi” sweets, an indispensable treat for sweet-toothed Indians. But co-owner Girish Aggarwal admits the silver is thinner than it used to be, as the diner-style snack restaurant tries to maintain profits in the face of soaring prices for the metal.

“We used to put five silver leaves on a batch, now we are putting on four,” says Aggarwal, plumped in front of the cash register in the white-tiled dining room.

Silver prices, which averaged under 18,000 rupees per kilo in the five years to 2009, hit a peak of 73,600 rupees in April, and futures still trade around 53,000 rupees. Demand for silver in marginal uses such as leaf, embroidery thread and traditional mirrors is highly price sensitive, said Metals Analyst with research company GFMS, Gargi Shah.

The two sectors, both pretty much unique to India, account for about 10 per cent of the country’s industrial fabrication, which totaled 1,979 tonnes in 2010, GFMS said in its World Silver Survey 2011.

“For example, sweets have a relatively low price point of say 200 rupees/kilo on an average, but today just one gram of silver costs 50 rupees, which is a fourth of the total retail price point, and hence unviable,” Shah said. In the five years from 2005 to 2010, demand for silver leaf fell 23 per cent while consumption for use in silver jari, or thread, for embroidering on saris and weaving, slid 40 per cent, according to GFMS.

India, the world’s largest importer of silver, bought 3,029 tonnes in 2010, double the year earlier after a weak monsoon cut demand in 2009, though purchases are volatile and depend a great deal on price.

“As long as the price of silver moves northwards, it will affect the use of silver in these (marginal) applications,” Shah says.

Higher prices are prompting some innovative measures to extend the use of silver by mixing with cheaper metals like copper and aluminium, or simply spreading its use more thinly. Manager of a wholesaler of foils in Mumbai’s busy Zaveri Bazaar, Tushar Agarwal, says sweet makers’ use of aluminium has helped bring his foil business almost to a standstill. In a glass-fronted building in east Delhi that looks more like a shopping mall than a factory, the walls are sound-proofed against the pounding of machines which take eight hours to flatten a 20 millimeter square of silver to 160 millimeters and just 0.2 microns thick, much finer than human hair. For 150 sheets, sweetmakers pay 450 rupees.

1 2

Tags: price of silver, Silver, silver analysis, silver futures, silver futures prices, silver news, silver price, silver prices, silver spot, spot silver

Posted by Silver Guru on Jan 16 2012. Filed under Silver Analysis, Silver prices. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry