The Great Silver Squeeze: Weaponised Scarcity

As of late January 2026, the global silver market has transitioned from a cyclical deficit into an acute geopolitical crisis. The "Devil’s Metal" has shattered the psychological $100 barrier, briefly touching $120 per ounce as of January 29th. This is not merely a speculative rally; it is a structural repricing driven by a calculated supply-side shock from Beijing.

The "Why": Weaponised Licensing

The primary catalyst is China’s January 1, 2026, export licensing regime. Beijing has abandoned its predictable quota system in favor of a restrictive framework that authorizes only 44 state-sanctioned companies to export silver.

• The Strategic Shift: By treating silver as a "strategic material" on par with rare earth metals, China is effectively prioritizing its domestic Green-Tech and AI sectors.

  
  

• The Leverage: China controls 60–70% of the world’s refined silver supply. By restricting exports, they are creating an "artificial bottleneck" that starves Western industries while keeping domestic prices lower for Chinese manufacturers.

  
  

Quantity: The Missing Ounces

The market is entering its fifth consecutive year of structural deficit.

• The Gap: In 2025, global demand reached 1.24 billion ounces, while total supply (mining + recycling) only managed 1.01 billion ounces.

• The Deficit: This leaves a 230-million-ounce shortfall—roughly equal to the entire annual production of Mexico, the world’s top producer. With China "locking the vault" on its refined stocks, the physical availability in Western hubs like the COMEX has plummeted by over 70% since 2020.

  
  

2026 Price Forecast: Blue Sky Territory

Analysts have moved into "aggressive" territory following the January breakout.

Timeline	Analyst / Institution	Price Target
End of Q1 (3 Months)	Citigroup (Citi)	$150/oz
End of Year 2026	Bank of America	$170/oz
Consensus Target	Market Analysts	$120 – $140/oz

Impacted U.S. Industries and Recourse

The U.S. has designated silver as a "critical mineral," yet it remains dangerously exposed:

• Solar & Electrification: The U.S. solar industry consumes over 140 million ounces annually. High prices may force "thrifting" (reducing silver content), but this risks lowering panel efficiency.

• Defence & Aerospace: Silver is essential for the electrical contacts in guided munitions and AI-driven drone swarms. The U.S. Section 232 review suggests that the defence industrial base has almost no immediate recourse other than depleting strategic stockpiles.

  
  

• Recourse: The U.S. is currently considering emergency incentives for domestic secondary recycling and fast-tracking permits for lead/zinc mines (where silver is a byproduct), though these will take years to impact supply.

  
  

The Pipeline: Are Copper and Aluminium Next?

There are troubling signals that silver is the "test case" for broader base metal restrictions:

• Aluminium: China has a self-imposed 45-million-tonne capacity cap. In 2026, smelters are increasingly competing for power with AI data centres. This has already cut net exports by 700,000 tonnes, keeping global markets tight.

  
  

• Copper: While no formal export ban exists yet, China’s 2025-2026 action plan calls for "strengthening resource utilisation," which often precedes export controls. If silver successfully pressures Western tech, copper is the logical next step due to its role in the global power grid.

  
  

Can the U.S. Block Ore Exports?

The U.S. has a "Nuclear Option," but it is a double-edged sword:

• Export Controls on Raw Ore: The U.S. and its allies (like Australia or Peru) could theoretically block the export of silver, lead, and zinc concentrates to Chinese smelters.

• The Catch: China currently holds the world's largest refining capacity. If the West stops sending raw ore, it might starve Chinese smelters, but it would also leave the West with a surplus of raw dirt and zero finished, high-purity silver bars for their own factories.

  
  

Conclusion: We are witnessing the end of "Just-in-Time" commodity trading. Silver has become a geopolitical barometer. If the U.S. cannot secure a "Natural Zero" interest rate environment through an AI productivity miracle, the physical cost of silver may become the ultimate ceiling on the Western digital transition.