LBMA silver inventories dropped to 910 million ounces in May, the lowest monthly reading since 2023. The drawdown accelerated from the 940 Moz recorded in April. COMEX-registered warehouse stocks fell 1.8% month-on-month to 385 Moz, reflecting continued physical offtake.
The physical premium in Shanghai rose to $1.20/oz over the COMEX futures price, up from $1.05/oz last month. Chinese import demand remains strong as industrial activity, particularly in solar panel manufacturing, sustains elevated silver consumption.
India is also a factor. Silver imports reached 180 Moz in the first five months of 2026, up 32% from the same period in 2025. The Indian government's push for domestic solar manufacturing under the Production Linked Incentive Scheme is driving sustained import demand.
The tightening physical market is not yet reflected in forward prices. The December 2026 COMEX futures contract trades at a $0.30 premium to spot, barely above the carrying cost. This suggests the market believes current demand will be met by secondary supply.
Physical premiums are rising even as futures prices fall — a signal that spot availability is tightening. Buyers requiring physical delivery should secure Q4 coverage now. The Shanghai premium of $1.20/oz adds 1.8% to the import cost, making domestic sourcing more competitive.