India’s army of gold refiners faces new competition

India’s army of gold refiners faces new competition

Gold refining has a long history in Satish Pratap Salunke’s family.

Following in the footsteps of his father and grandfather, he and his business collect scrap gold from goldsmiths, melt it down and sell it back to goldsmiths in the form of gold bars.

He has two refineries, one in Kochi in the southern state of Kerala and the other in Tiruchirappalli in Tamil Nadu. Relatives have refineries elsewhere in southern India.

“Every day of my refining, on average, I melt two to three kilograms of gold,” he said.

Almost every city in India will have at least one small refinery similar to the one operated by Mr. Salunke. It is known as the “unorganized” refining sector, which distinguishes it from the large refiners that make gold bars and coins from imported, unrefined gold.

It is estimated that, in total, Indian households hold a massive 25,000 tonnes of gold, and some of it is always available for sale, especially when gold prices are high or the economy is bad and people want to accumulate cash.

Goldsmiths can process the returned gold themselves but will often use a small refiner that will turn the gold back into bars.

Mr Salunke said local jewelers like to deal with small refiners like him, because they work quickly and are happy to accept cash.

“Most jewelers prefer to buy gold from us, because we are based in each city with a small unit. A jeweler can take back his pure gold in a few hours, unlike a big refiner that will take days to refine the recycled gold.”

According to the World Gold Council, of the 900 tonnes of gold refined in India in 2023, 117 will come from recycled sources.

But the recycling market is being watched by India’s big industrial gold refiners.

They have grown in recent years, driven by favorable import duties on their main source of gold Рimported, unrefined gold known as gold doré.

Between 2013 and 2021, India’s large-scale refineries increased their capacity from 300 to 1,800 tonnes of gold per year.

But it is difficult for them to import enough unrefined gold to keep their refineries running. In fact, less than 50% of their refining capacity is used, according to Harshad Ajmera, secretary of the Gold and Mint Refiners Association.

Therefore, large refiners have opened scrap collection centers in large cities, hoping to collect unwanted gold and turn it into high-quality bars.

“Currently most of the gold recycling is done by the unorganized sector [small refiners] – that needs to change,” said Mr Ajmera.

He wants India to become a global hub for gold refining, which means importing more unrefined gold and for big firms to take over more gold recycling.

“Switzerland is the largest gold refinery and transit hub in the world. We want India to be in the same position,” said Mr. Ajmera.

CGR Metalloys is one of India’s leading gold refiners, refining approximately 150 tonnes of gold per year.

Like other big players, it has the latest equipment for gold smelting and refining, which is said to be better for the environment and can guarantee the purity of its gold to a very high level.

“Refined bullion is analyzed to the highest level of precision, on various gold assay methods,” said James Jose, managing director at CGR.

It has opened three gold recycling centers in the state of Kerala.

“Indian refineries have huge capacity… we have huge overheads. So setting up a collection center will increase the flow of scrap gold. This will help increase my production by 30% to 40%,” said Mr Jose.

In recent years, the government has become increasingly involved in the refining industry. In 2020, the Bureau of Indian Standards (BIS) introduced various standards for gold bars including purity, weight, marks and dimensions.

BIS approved refiners can sell their bars to the commodity market.

“The industry is gradually moving towards greater organization and efficiency, led by refineries licensed by the Bureau of Indian Standards, which set a trusted benchmark for refined gold products, which will make India a global hub,” said Somasundaram. PR, chief executive of the World Gold Council of India.

Some figures show that smaller filters are losing ground. According to consultancy Metals Focus, in 2015 between 70 and 75% of the recycling industry was unorganized; by 2021 has dropped to between 60 and 65%.

The measures taken by the big recycling firms are of little concern to Mr Salunke – he says he knows his customers.

“Local gold sellers are not willing to pay the high recycling costs beyond what we charge,” he said.

And, like other small refiners, Mr. Salunke has also invested in modern refining technology.

“The gold we recycle is as pure as the gold recycled by an organized refinery,” said Mr Salunke. “Now we have testing facilities to check purity, so it would be wrong to say we can’t refine gold into its purest form.”

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