EDITOR: | September 29th, 2016 | 2 Comments

Tin Market Shock

| September 29, 2016 | 2 Comments
image_pdfimage_print

price-increaseAccording to the LME quotations, tin prices have increased 31% y.o.y to $19,700/tonne on the 23rd of September 2016 (cash buyer basis). In the last week alone, prices rose by over $300/tonne, which was explained as being due to a long position holder.

These prices were echoed in China. Tin Ingot (99% min) rose 19.25% over the past year to RMB128,000/tonne (~$20,000/tonne) and 60% concentrates rose 21.39% y.o.y to RMB113,500/tonne (~$17,734/tonne).

There are a number of factors playing into the rise in prices. These are:

  • Stock levels: According to ITRI, pipeline stocks held by tin users have fallen by a third (~10,000 tonnes) over the last five years to an estimated 21,000 tonnes. Furthermore, LME inventory is looking quite depleted. Open tonnage, which is the volume available for settlement positions, reached a twelve-year low of 2,705 tonnes at the beginning of September.
  • Declining supply from Indonesia: Indonesia is the largest supply in the world however exports in the first eight months of the year declined 16% y.o.y to 38,343 tonnes. This compares to 100,000 tonnes supplied in 2012. According to recent reports, Refined Bangka Tin (RBT), a large private tin smelter in Indonesia has resumed production after a five months of not producing and will aim to export 12,000 tonnes this year. However, the company is unlikely to reach this target.
  • Environmental crackdowns: In Indonesia, repeated government crackdowns have contributed to the decline in Indonesia’s tin production. According to Indonesia’s Energy and Resources Ministry, in May only 60% of the tin producers were operational and most were not operating at capacity. In addition, environmental audits in China during August also saw the closure of several Chinese smelters in the short term. Many smelters have reopened, though four smelters accounting for 18% of China’s output is expected to remain closed until the end of October leading to short term tightness.
  • Local disputes: Burma has a long history of producing tin, but only began concentrating around three years ago. The mining district in the South has three contractors, of which, two of them (Heinda and Bawapin) halted production in June for two months owing to disputes with local residents.

Notwithstanding local disputes, Myanmar’s Wa district, an area largely controlled by the State with political and economic ties to China has emerged as the swing producer in the tin story over the last few years and established the country as the (distant) third largest producer of tin with pretty much all of it going to China.

  • China keeps its tin for domestic use: Despite challenges with the environmental audits, China did not need to increase its net imports. Net imports to China totaled 4,000 tonnes in the first seven months of the year, down 26% y.o.y. China instead was able to draw down local stocks. Also as the recipient of Myanmar’s exports, China has more than adequate tin supplies.
  • ShFE vs LME: A 10% export duty on exports of refined metal ensures that China by-and-large does not export tin. Furthermore, the Shanghai Futures Exchange (ShFE), while it hasn’t garnered the same level of success as the nickel contracts, is attracting tin to warehouses registered with the ShFE. Volumes traded in the first eight months of the year totaled 4.47m tonnes, up from 1.03m tonnes recorded during the period from March-December 2015. It is expected that Shanghai volumes will continue expanding at the expense of LME volumes.

We expect that the LME will be subject to periodic supply shocks over the next few months, especially as the ShFE gains more and more traction.


Lara Smith

Editor:

The Founder and Managing Director of Core Consultants in June 2009, Lara and her team are committed to supplying high quality commodity market research, analysis ... <Read more about Lara Smith>


Copyright © 2016 InvestorIntel Corp. All rights reserved. More & Disclaimer »


Comments

  • Sharron Clayton

    Great article Lara and a few people noticed as it was at the top of the first page of Google news search within 25 mins!

    September 30, 2016 - 10:38 AM

  • Graham Willett

    Hi Lara,

    Have you any comment on tantalum prices. Will they follow a similar uptrend over the coming months??

    Thanks for the Article. Graham Willett

    October 2, 2016 - 9:39 PM

Leave a Reply

Your email address will not be published. Required fields are marked *