At the beginning of the year, the Exchange For Physical (EFP) spread for silver (calculated as COMEX futures minus LBMA spot) rose dramatically from near zero to almost $1. This was largely attributed to fears or confusion over USA tariff policy and the potential impact of same on moving physical silver from London to New York eating into the profit of the arbitrage trading that bullion banks have long enjoyed. The bullion banks started moving physical silver en masse to New York - COMEX vaults saw massive inflows and the LBMA saw heavy outflows.
As tariff fears subsided around February and March, The COMEX continued to see massive inflows while the LBMA claimed the outflows had stopped. In April I wrote Silver Presents the Magical Metal Mystery questioning where the COMEX inflow metal was coming from.
Recently, EFP spreads have started to blow out again as some pundits are claiming tariff uncertainty is once again impacting the flow of physical silver - only this time it's supposedly causing bullion banks to halt the importation of silver rather than accelerating it:
Rob Gottlieb said:Welcome back to major dislocations in Precious Metals!!!!!!!!!!
#Gold #Silver
This time could be worse than Covid and the original Tariff threats, unless the US acts quickly and reaffirms precious metals in bullion form will not be subject to tariffs. Banks are Not shipping metal into the CME until there is clarity, without clarity, the dislocation will continue to widen. If US Customs affirms no tariffs, EFPs will collapse.
...
pmbug said:...
The most recent silver stock reports from the COMEX have provided no indication that there is any issue with the inflow/importation of silver, but Rob says this is just a pipeline observation.
If he is correct, we should start witnessing a dramatic diminishing of inflows to the COMEX and perhaps an even more extreme EFP spread very soon.
Section 232 investigations can take up to 270 days from initiation per the Bureau of Industry and Security.
In the two days since that exchange, COMEX reported receiving no silver on Sep 2 and then receiving 1,429,984.62 ozt (~44.5 metric tons) on Sep 3. Is this just the last shipments of a dead pipeline? Or maybe something else?
Within the last few days, I noticed some anecdotal reporting that retail here in the USA is mostly selling silver to local coin shops / dealers which is feeding recycling into LGD bars:
Brian Kuszmar said:As a first hand, front line soldier, I don't see the public buying gold/silver, the small amount of stackers are bought in already, few new stackers walking in, and the rest of the worlds has their whole economic world tied up in their homes, retirement accounts, pensions, which are stacked with equities. Jmo
Bold emphasis is mine:
Different Brian said:... Business is brisk right now. Uh
8:22 incredibly brisk. Uh the uh refineries
8:26 and wholesalers are pinched right now,
8:29 not for funds, but for time. So, we're
8:33 hearing um examples of them expanding
8:36 their operational hours. Uh they're
8:39 gonna one specifically is now working
8:42 through the weekends uh expanding their
8:45 uh normal eight hour days just to handle
8:48 all the incoming material. Ton literally
8:52 thousands of pounds of silver are being
8:54 delivered to these folks on a regular
8:57 basis. Uh one shipment uh the other day
9:00 that the FedEx brought in was 4,000 lbs
9:03 of silver and one ground shipment to a
9:06 refinery. That's one uh and uh it's just
9:11 pouring in. Gold seems to be relatively
9:15 uh par for the course with the amount
9:17 that's coming in and payable ounces. Uh
9:19 for what I'm being told, it's just the
9:21 massive influx of silver that has hit
9:25 the uh refineries and wholesalers. I
9:28 belong to several uh professional forums
9:31 where dealers are uh try to sell or
9:35 attempt to sell uh goods to other
9:37 dealers. Uh and we're seeing uh silver
9:40 lots, just generic 999 bullion lots
9:43 going unsold at 50 cents on their spot.
9:46 That's two other dealers. So that just
9:48 tells you uh what is going on. There's
9:51 such an influx of material and it's
9:54 literally just uh it's just getting
9:55 burned. ...
So I got curious and explored a bit more with help from "SuperGrok" (AI on X):
Grok said:The USA-based refineries approved for COMEX silver delivery and capable of producing London Good Delivery (LGD) silver bars (typically 750-1,100 oz, meeting LBMA standards) include Asahi Refining USA, Metalor USA Refining, Sabin Metal Corporation, Kennecott Utah Copper LLC (Rio Tinto), and ASARCO LLC. These refineries produce LGD bars as part of their operations, often as a by-product of copper refining or through recycling. Specific production capacities for silver (in metric tons per year) are not always publicly disclosed, as they can be proprietary or vary based on feedstock availability. Below is a summary based on available data, focusing on silver refining capacity where reported (or actual production as a proxy when capacity is not explicit).
Refinery Location Silver Refining Capacity/Production (tons/year) Notes Asahi Refining USA Inc. Salt Lake City, UT ~2,200 (combined with Canadian facility) Capacity for North American operations (US and Canada); primarily from mining and recycling. Asahi acquired former Johnson Matthey facilities in 2015. Metalor USA Refining Corp. North Attleboro, MA Not publicly disclosed (global group ~400) USA facility processes primary and secondary silver; global Metalor capacity is ~400 tons/year, but US-specific figure unavailable. Expansion completed in 2022 for increased capability. Sabin Metal Corporation Scottsville, NY Not publicly disclosed Focuses on recycling PGMs, gold, and silver; one of the largest independent refiners in North America, with recent expansions but no specific silver figures available. Kennecott Utah Copper LLC (Rio Tinto) Magna, UT ~124-146 (actual production) Silver is a by-product of copper refining; annual output around 4-4.7 million oz (~124-146 tons), which likely approximates capacity. ASARCO LLC Amarillo, TX Not publicly disclosed Silver is a by-product of copper production (~170,000 tons copper/year); silver output is minor (estimated tens of tons annually based on industry norms), but exact figures unavailable.
Note: Capacities refer to overall silver refining, from which LGD bars are produced. Actual output can be lower due to market demand, raw material supply, or operational factors. For context, total US silver mine production in 2024 was ~1,127 tons, with recycling adding ~1,572 tons, much of which is processed by these refineries. Other potential USA-based COMEX-approved refiners (e.g., Sunshine Minting) focus on smaller bullion products and may not produce LGD bars at scale.
Given that the total silver processing capacity in 2024 was ~2,699 tons and that these refineries do not devote 100% of capacity to making LGD bars, it would seem reasonable to estimate that 2,700 tons might be an upper capacity limit for LGD bars for the year. That breaks down to ~225 tons per month.
Since February (when the LBMA claims silver outflows stopped), the COMEX has reported receiving (thanks to Nick Laird for his chart):
| Month | Received (in metric tons) |
|---|---|
| February | 1,838.6 |
| March | 2,393.6 |
| April | 1,135.2 |
| May | 800.6 |
| June | 631.2 |
| July | 548.8 |
| August | 342.6 |
That's 7,690.6 metric tons received in 7 months. At 225 metric tons/month, we might expect that USA based COMEX approved refineries were able to crank out an upper limit of 1,575 metric tons of LGD silver bars in the same period. That leaves 6,115.6 metric tons that didn't come from scrap recycling, domestic mining/refining or from LBMA vaults (supposedly!). So where did it come from?