Tin shines on reduced supply Indonesia, the largest exporter, has been squeezing the market
The global tin market has been facing a deficit since 2010. The situation is likely to continue over the next two years, based on anticipated constrained outlook for growth in mine production and moderate demand pick-up.
The story of tin is intrinsically intertwined with Indonesia, the world’s largest exporter of refined tin — nearly three times larger than second-ranked Malaysia. The leader has been squeezing the tin market and prices have increased in recent months; yet there are challenges. Indonesia play Indonesia continues to suffer from a decline in ore grades and rising costs. Vis-à-vis 2013, production in 2014 is expected to stay flat at 88,000 tonnes, which is seen contributing to a global deficit this year. There are also regulatory constraints that are leading to a slowdown in exports. In addition, there are no significant new projects coming up in the near future.
In Indonesia, from September 2013, all tin ingot trades had to be put through the local exchange prior to export.
At the start of every week, a committee (including main producers) sets the minimum bid price on the exchange. In the last three months, the minimum bid price has been above LME prices. While LME prices can move higher, LME inventories are depleting, with current stocks estimated at 8,800 tonnes, the lowest level since February 2009. Experts have asserted that the Indonesian play cannot continue for long as there are limits and limitations to flow of commodities through an exchange.
No wonder, China looks increasingly focused on meeting its tin demand through raw material imports from Myanmar rather than metal imports from Indonesia.
On the other hand, the demand side is looking up with modest improvement in global GDP growth supporting consumption (although below levels seen in 2010-11).
No doubt, soldering tin use has suffered from the structural constraints of miniaturisation and circuit board developments over the past few years, contributing to lower intensity of use in electronics. Boost from electronics However, there is anticipation that global electronics sector conditions will improve this year and the next, supporting high level of demand growth for tin.
A continued recovery in global electronics production, coupled with growth in demand from new uses in sectors such as chemicals or lithium ion batteries, should support a positive outlook. Global shipments of semiconductors, which give a guide to demand for tin in solder alloys, accounting for about 50 per cent of total use, have been rising in recent months.
While Indonesia has contributed to tightening of the refined tin market, China’s softening imports have provided some counterbalance in the wake of rising domestic refined production and ample domestic inventories (estimated at 20,000 tonnes).
If demand conditions improve, China could be de-stocking. While the average price in 2013 was $22,300/t, tin should trade at around $25,000/t in the second quarter progressively rising to $27,000/t by the fourth quarter this year. The average price in 2015 may rise to $30,000/t on LME.
TRF Price at posting:
8.3¢ Sentiment: LT Buy Disclosure: Held
