Silver Surge in Late 2025: How China’s Export Controls and Industrial Demand Are Shaping Risk

Recent Market Performance & Short-Term Risks
Silver has seen a powerful uptrend in 2025: up ~156% year-to-date, including ~30% in December alone. However, this rally culminated in sharp downward volatility after the CME Group raised margin requirements for silver futures, forcing speculative positions to unwind. Adding to this, strong U.S. GDP prints bolstered the dollar (DXY), generally a headwind for dollar-priced commodities like silver.

China’s Export Licensing Regime & Supply Implications
Beginning January 1, 2026, China is implementing a government licensing system for silver exports, affecting about 60-70% of the globally traded refined silver supply. Exporters will need to meet eligibility criteria—e.g. ≥80 tonnes annual production and ~$30 million in credit lines. Smaller producers or those lacking requisite financial/capacity credentials will be excluded, likely constraining supply internationally as domestic use is prioritized.

Physical vs Paper Price Divergence
Physical markets in Shanghai (~$85/oz) and Dubai have shown large premiums over COMEX futures (~$75-80 earlier in the rally, falling with pullbacks), indicating a pricing gap between deliverable and paper markets. London OTC silver contracts are in backwardation at the highest levels in decades, and options markets price further upside tail risk.

Structural Demand Drivers
Major sources of demand include the solar industry (projected 290 million ounces this year, rising to ~450 million by 2030), and growing demand from AI/data center build-outs, both reliant on silver’s conductive properties. Attempts to substitute silver with copper for industrial usage are limited due to long pay-back periods (~18 months) and higher break-even costs (e.g. solar needs silver to break even at ~$134/oz, ~70% above current spot).

Strategic Implications & Open Questions
• Supply chain risk rises: countries dependent on imported silver, especially for critical industries, may face cost or sourcing disruptions if Chinese export licensing is restrictive.
• Investment strategy diverges: physical silver and miners likely to benefit from scarcity and premiums; paper instruments increasingly exposed to leverage and margin risk.
• Open questions include how many Chinese refineries/exporters will be approved under the licensing regime; whether physical shortages become acute enough to force mining/capacity expansion; how substitution technology might evolve; and how broader macro forces (dollar strength, interest rates, tax policy) will influence near-term flows.