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At the beginning of 2026, extreme fluctuations in silver futures, marked by a historically high of more than $120 per ounce and a near 30% decline on COMEX, put huge pressure on smelters with leveraged hedges, sources told Fastmarkets.
The silver price experienced similar turbulence in China’s domestic market.
The most-traded Shanghai Futures Exchange silver contract reached a record high of 32,382 yuan per kg on January 29 before retreating to close at 27,941 yuan per kg later on the same day.
Downward momentum continued into early February, with the price falling further to 20,802 yuan per kg on Thursday February 12 – down by more than a third (35%) from the all-time high.
“Position holders had to increase their margin requirements and a few smelters [faced] tightening cashflows… in hedging,” a trader source told Fastmarkets.
“It’s too risky now,” the trader said, adding that “some market participants are experiencing severe losses amid panic selling and the forced liquidation of over-leveraged positions.”
Rising silver prices often incentivize smelter buying of raw materials with high precious metals and minor metals content. Given the improved by-product economics, smelters are willing to pay a premium in concentrate purchasing, which means accepting lower treatment charges (TCs).
In the current market environment, however, the huge fluctuations in silver have, instead, suppressed Chinese smelter procurement appetites, sources said.
Fastmarkets assessed the lead spot concentrate TC, high silver, cif China at $(240)-(200) per tonne on January 30, down from $(220)-(180) per tonne a month earlier.
Fastmarkets assessed the lead spot concentrate TC, low silver, cif China at $(200)-(170) per tonne on January 30, down from $(180)-(150) per tonne a month earlier.
“Most [smelters] are in wait-and-see mode,” a second trader source said.
Global silver prices have trended higher since the third quarter of 2025, supported by elevated macroeconomic uncertainty, geopolitical risks and expectations of a potential shift toward a looser monetary policy in major economies.
At the same time, resilient industrial demand for silver – particularly from photovoltaics and other new energy applications – has provided additional structural support to its price.
The surge in silver prices, combined with elevated volatility, has significantly increased the funding requirements associated with physical trading, including margin and collateral costs, sources told Fastmarkets.
The Chicago Mercantile Exchange (CME) Group and the SHFE recently raised the margin requirements across their precious metals contracts following what they described as a routine review of market volatility.
Margin requirement for the CME’s COMEX 5000 Silver Futures was raised to 18% from 15% effective February 6, which marks the third margin increase by CME since it revised its margin framework on January 13.
According to the SHFE, from the close of settlement on February 9, the daily price-limit ranges for listed silver futures contracts will be raised to 20%, while margin requirements will be increased to 21% for hedging positions and 22% for non-hedging positions.
“I heard that many companies are currently facing funding constraints when purchasing concentrates – even some state-owned enterprises are experiencing tight liquidity,” a Shanghai-based source said.
The broader fundamentals for lead concentrates remain tight, however, with the supply deficit expected to persist through 2026, Fastmarkets understands.
“Only a very limited increase in lead raw material volumes is estimated this year,” according to Fastmarkets analyst James Moore. “It will essentially be zero.”
While some incremental tonnages from projects such as Volcan’s Romina project and AgMR’s Reliquias mine in Peru and Bunker Hill in the US are scheduled to come online, those volumes are largely expected to be offset by lower output from the Red Dog mine in Alaska and the Cannington mines in Queensland, Australia. As a result, the net addition to global supply remains marginal and insufficient to materially ease the tightness seen in 2026.
Against this backdrop, any pullback in smelter purchasing activity driven by silver volatility is viewed as temporary rather than a reflection of weakening underlying demand for concentrates, according to market participants.
Several sources said that, once silver prices stabilize and cashflow pressures ease, procurement appetites may gradually recover – especially for high-silver material that continues to offer attractive by-product credits over the longer term.
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