Silver's Supply Crisis Deepens as COMEX Delivery Squeeze and Chinese Export Curbs Converge

Silver prices surge 3.3% as COMEX delivery coverage drops below stress threshold, China tightens supply chain, and structural deficits persist for sixth year.

The silver market is facing a rare convergence of immediate delivery pressure and long-term structural constraints, with prices climbing more than 3.3% on Thursday to around $73.70 as traders scrambled to assess the implications of a looming physical shortage.

At the heart of the near-term tension is the COMEX May contract's First Notice Day on April 30, when holders of open positions must decide whether to roll contracts forward or take delivery of the metal. The numbers tell a stark story: roughly 135 million ounces in open May contracts stand against just 77 to 80 million ounces available for immediate delivery. That leaves the coverage ratio at a precarious 13% to 14% — below the 15% stress threshold for six consecutive months.

China's Multi-Pronged Supply Strategy

Beijing's tightening grip on the silver supply chain has added another layer of complexity. Starting in May, China will impose export restrictions on sulfuric acid, a chemical critical to copper production — and by extension, to silver mining. Approximately 70% of global silver is produced as a byproduct of copper, lead and zinc mining, meaning any disruption to base metal processing directly impacts silver availability.

China controls over 40% of global sulfuric acid production, and the timing could hardly be worse. Chile, the world's largest copper producer, imports more than one million tonnes of Chinese sulfuric acid annually, with a fifth of its copper output dependent on acid-based leaching processes.

The sulfuric acid curbs are just the latest in a series of coordinated moves. Since January 2026, China has introduced an export licensing requirement for silver, followed by record imports in March, and now the acid export ban. Each measure targets a different link in the supply chain.

Geopolitical risks in the Strait of Hormuz compound the problem, disrupting roughly one-third of global sulfur trade and driving up energy costs. A US official confirmed that President Trump rejected Iran's latest proposal, extinguishing hopes for a swift resolution to the conflict.

Structural Deficit Persists

The Silver Institute projects a sixth consecutive annual deficit of 46.3 million ounces for 2026, with cumulative inventory drawdowns reaching 762 million ounces over five years. The scale of the drain became evident in January, when 33 million ounces — representing 26% of the deliverable COMEX pool — disappeared from registered inventories in a single week.

The solar sector, long a major demand driver, is pulling back. Manufacturers including Longi plan to shift to copper-based metallization by 2026, with the Silver Institute forecasting a 19% decline in solar-related silver demand.

But technology-driven demand is filling the gap. AI data centers, 5G infrastructure and electric vehicles require increasing amounts of silver for its conductivity. Analysts expect these emerging applications to more than offset solar sector losses over the medium term.

Macro Crosscurrents

The macroeconomic backdrop has been a mixed bag for silver. The US Justice Department dropped its investigation into Jerome Powell on April 24, clearing the path for Kevin Warsh — nominated by Trump on January 30 — to become the next Fed chair. Markets are pricing in a looser monetary policy stance under Warsh, which typically benefits hard assets like silver.

Yet the Bank of Japan held its key interest rate steady, and both the Fed and the European Central Bank are due to announce their decisions this week. Rising expectations that central banks will keep rates higher for longer have weighed on non-yielding precious metals.

The US Bureau of Economic Analysis is set to release its first-quarter GDP estimate on Thursday at 14:30 MEZ. The Atlanta Fed's GDPNow model points to annualized growth of just 1.2%. A weak reading would fuel stagflation fears — historically a supportive environment for physical metals, even as interest rate pressure persists.

For now, silver sits at a critical juncture, caught between a tightening physical market and a macro environment that has yet to fully align in its favor.