China's grip on silver refining could pose supply risks for India, says Tata Mutual Fund

China’s growing dominance over the global silver supply chain could emerge as a key risk factor for countries dependent on the metal, including India, according to Tata Mutual Fund, which expects the long-term outlook for silver to remain supported by persistent supply deficits and rising industrial demand.

Silver, which plays a critical role in industries ranging from solar energy and electric vehicles to semiconductors and 5G infrastructure, is on track to record its sixth consecutive year of supply deficits in 2026, with demand continuing to outpace available supply.

Tata Mutual Fund noted that while silver has traditionally been viewed as a precious metal, its growing industrial applications have transformed it into a strategic commodity. As countries accelerate investments in clean energy and advanced manufacturing, the importance of secure and diversified silver supplies has increased.

At the centre of the global silver market is China.

According to the fund house, China controls 60-70% of the world’s silver refining capacity and holds around 11% of global reserves, giving it significant influence over the silver value chain.

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China’s silver demand reached an eight-year high in the first quarter of calendar year 2026, even as domestic stockpiles declined sharply, creating what Tata Mutual Fund described as a rare combination of record consumption and shrinking inventories.

The report also highlighted that China has recently started implementing refining restrictions, raising concerns over potential bottlenecks in global supplies.

Why does this matter for India?

India is among the world’s largest consumers of silver and has seen rising demand from both investors and industry. The country’s expanding solar power capacity, growing electronics manufacturing ecosystem and increasing adoption of electric vehicles are expected to drive higher silver consumption in the coming years.

Any disruption in global refining capacity or tighter export controls from China could therefore affect supply availability and prices for Indian users.

India’s solar ambitions are particularly relevant. Silver is an important component in photovoltaic cells used in solar panels. With the government targeting 500 GW of non-fossil fuel capacity by 2030 and encouraging domestic manufacturing under the Production-Linked Incentive (PLI) scheme, the demand for silver is likely to increase further.

At the same time, India’s electronics and semiconductor ecosystem is also expanding through various incentive programmes, potentially making the country more dependent on reliable silver supplies.

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Structural demand drivers

According to Tata Mutual Fund, these structural demand drivers, combined with the ongoing supply deficit, point to a supportive backdrop for silver prices over the long term despite near-term volatility.

The fund house said silver’s industrial demand had risen steadily between 2021 and 2024 and continued to account for the majority of global consumption.

Although economic uncertainty and recent liquidation of long positions have weighed on prices in the short term, Tata Mutual Fund believes investors should adopt a staggered approach toward silver, considering the metal’s inherently volatile nature.

As the world transitions toward cleaner energy and digital technologies, China’s outsized role in silver refining could increasingly become a strategic issue, with implications extending far beyond commodity markets.