Friday, February 25, 2011

Perth Mint vs Royal Canadian Mint - Silver shortage?

A few weeks ago when there was evidence of retail level shortages I posed some questions on the Perth Mint Blog. Ron Currie (Sales and Market Director for the Mint) was kind enough to come back with some detailed answers, except for one of the questions, where a direct answer was avoided.
BB Question: In the case that Perth Mint had trouble sourcing 1000 oz bars via wholesale distribution channels, could we expect public disclosure of this on the blog or in general when questioned?

RC Response: We have no problems sourcing 1,000oz bars and have plenty in stock. Our problem is finding capacity to cast the metal into retail sizes such is the level of demand. There would be no call for public disclosure as we do not foresee any such difficulty arising.
In the comments section on the Perth Mint Blog I pointed out that I'd expected the final question would not be directly answered:
BB Comment: I was expecting the tricky wording around the last question to avoid a direct answer. Perhaps you are in a better position to judge, however supply/demand figures I have seen would indicate that there is definitely the potential for physical shortages, especially in the case that China starts adding Silver to their reserves as was suggested by Xia Bin (Central Bank Adviser) recently. Though perhaps we will see a significant price rise in Silver that stems demand and brings out more sellers.
And Ron Currie replied with:
RC Comment: "Tricky" language! Hey, we're just manufacturers, not international silver market analysts! We have plenty of silver in stock and ongoing supply is not a problem at present, so forgive me for going no further than that.
So it would seem that as of three weeks ago the Perth Mint was not having any difficulty acquiring Silver.

However today on the King World News blog we hear from David Madge, Director of Sales at the Royal Canadian Mint:
With continued reports of booming sales and tightness in the silver market, today King World News interviewed Dave Madge director of sales at the Royal Canadian Mint.  When asked if the RCM is having trouble acquiring silver Madge responded, “Demand right now for silver is through the roof and it shows no signs of slowing at this point.  Sourcing silver is becoming very difficult.  We are competing with a great many players when it comes to purchasing silver and many of these players are bidding the price higher.”
Dave Madge of the Royal Canadian Mint continues:

“Our advantage is that we have had long-term relationships with our suppliers and that has helped us in this situation.  We have been able to leverage off of those relationships to get supply, but it still remains a big challenge sourcing material.  We’re looking at ways of mitigating our risk regarding supply of silver.

We are anticipating it to become even more difficult to secure supplies in the future.  This is based on what we are seeing firsthand and what our suppliers are telling us.  We work closely with these banks to secure silver and they tell us there is a lot of competition.

When asked what this means for the price of silver and how long this condition is expected to persist Madge stated, “I think you are going to see the premiums go up in order to secure silver.  At some point some players will be priced out of the market.  I don’t think this is a short-term situation, I think there are a lot of issues going forward and this may be the new norm.”
Given the opposing views on sourcing Silver, it leaves a few questions outstanding in my mind...

Is the Perth Mint finding it harder to source Silver now compared with a few weeks ago? Do their experiences in sourcing Silver now reflect that of the Royal Canadian Mint?

Is the Royal Canadian Mint finding it more difficult because they need a larger quantity or do not have as much readily available from mine sources (e.g. in 2009  almost 10 million 1oz Maples were produced, around half of Canadians mined Silver output for the year, Australia has a much higher level of Silver output from mining & I believe Perth Mint output would be a lot lower than the Royal Canadian Mint)?

Is the truth being stretched by one of the Mints and if so for what purpose?

Personally I don't see that either has anything to gain from stretching the truth.

I will pose some questions on the Perth Mint Blog over the weekend and see what more they can tell us (and will post any response received on a new entry or in the comments below, so check back in a few days!).

It's interesting times for Silver!

BB.

Disclosure: Positions held in Silver. Not investment advice. Do your own research.

5 comments:

  1. We still aren't having any problems sourcing silver, remember we refine gold and silver directly from Australian miners.

    There isn't any truth stretching on either side. Physical precious metals (unlike paper) cost to move around. So local supply/demand situations can differ and "loco" premiums or discounts can arise.

    Unless the loco price difference is big enough to arbitrage, then it is entirely possible for one country to experience shortage while another a surplus.

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  2. Thanks for the reply Bron, I had suspected that might be the issue given that the RCM implied they were sourcing their Silver from banks.

    It seems like on one side of the world we have a Mint with plenty of supply, but not enough capacity to meet demand and on the other side a Mint with larger capacity, but is struggling to source Silver.

    BB

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  3. Went to Perth mint 3 weeks ago trying to buy 1kg silver but was told they did not have them and would be about a months wait.

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  4. Put in some orders for 1kg bars at the Perth Mint a few days ago and was told 3 months wait. And as far as has been disclosed the new presses are for coins only so whats the hold up with bars?

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  5. just went into perth mint today Ran out of 10oz bullion at least 1 month wait

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