EDITOR: | September 24th, 2013 | 11 Comments

The critical metal whose price may be about to soar

| September 24, 2013 | 11 Comments
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tmfbThe tin squeeze is on. The metal closed Monday’s session at the London Metal Exchange (LME) at $22,975/tonne. Industry insiders are expected $30,000 by Christmas; even staid banks are warming up to the idea, Pan-African operator Standard Bank expecting an average $28,000/tonne next year.

And hang on to your hats: the World Bank says tin output may be able to be kept at this level of production for another 19 years. All those smartphones and other electronic devices have placed a big strain on tin supplies (it’s the tin solder needed by almost every electronic device. Tin may still be used to line food cans, but it is increasingly a technology metal).

Here’s another scary fact: it can take decades to get a tin project from discovery to production. Sure, some are proceeding a good deal faster than that, but the vast majority of the extra production in recent years has been coming from the revival of previously abandoned or closed mines. Now the world’s biggest, which is San Rafael in Peru, is to start winding down three years from now — and there is not another mine of its size close to development.

At most, there are just 70 projects around the world which may — or may not — get into production by 2030. Meanwhile, the global deficit this year is expected to be around 6,000 tonnes (equivalent to Australia’s output). That doesn’t sound like much, but total tin stocks in LME warehouses around the world now sit 13,715 tonnes. By way of comparison, those same warehouses have 5.4 million tonnes of aluminium and 977,000 tonnes of zinc.

Meanwhile, Indonesia has thrown a spanner (a tin one) in the works. It is all about the fact that the government in Jakarta is requiring producers to trade the metal locally before the metal is exported — a policy designed to increase the value of tin and force global prices upwards by slowing shipments.

In other words, the Indonesian government, working with the large smelter owners like PT Timah, want to control the tin price. Many small smelter operators have been put out of business. Now the monsoon season is approaching and overall production and metal flow will become a trickle. Hence the squeeze.

bartin

Tin ingot

One source in the industry told Investor Intel they knew of a trading company which has been buying every Indonesian ingot they could get their hands on. The Indonesia Commodity and Derivative Exchange, in the tin pool, has only five sellers and 1 buyer.

Why does this matter? After all, Indonesia in only the No. 2 producer. According to the U.S. Geological Survey its 2012 tin output was 41,000 tonnes against China’s 100,000 tonnes. The important thing to know, however, is that China is not exporting much raw tin, which leaves Indonesia as the world’s main exporter (it being to tin what Morocco is to phosphate).

Then there is the issue of remaining resources. In its latest Global Economic Prospects report the World Bank analyses USGS figures regarding resource scarcity, that is, the years left where production can be maintain at present levels based on known resources.

In some cases, the trend has been positive since the last USGS survey 10 years ago: nickel’s output sustainability has increased from 43 to 46 years, copper from 26 to 41 years, and silver from 16 years to 22 years.

But tin has come back from 34 years to 19 years (the other two worse outlooks being iron ore from 136 years to 65 years, and bauxite from 180 years to 130). Tin reserves globally have declined by 40% over the past 10 years. The World Bank’s conclusion: “Of the nine metals examined here, tin appears to be the only reserve-constrained commodity”.

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Electronic devices, such as smart phones, have placed a big strain on tin supplies.

A survey by London-based ITRI and the Australia-Britain consultancy Greenfields Research shows those 70 potential projects between them have compliant resources totalling only 1.2 million tonnes of contained metal. “Only a handful of them are likely to becoming operating mines in the next few years,” is their conclusion. Most projects are either at very early stages or dormant and most of them would need at least a decade before they could be expected to come into production.

“On average, it appears it takes 10-12 years to progress from the publication of a maiden compliant resource through to initial production,” they say. (And remember it can take several years even to get to the maiden resource stage.)

And it looks as if Australia could be the pace-setter: of the 22 projects regarded as most advanced, 12 are owned by Australian companies.

Tin has not been a big issue for Toronto listed companies. The only ones that make the list with new projects are Silver Standard (TSX:SSO), Adex Mining (TSX.V:ADE) and Alphamin Resources (TSX.V:AFM).


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Comments

  • Tracy Weslosky

    This line got my attention: “Mason Graphite achieves 99.9% ultra-high grade purity; poised to be one of the lowest-cost flake graphite producers in the world.”

    September 24, 2013 - 10:48 AM

    • vacuum

      when Mason recently touched .29, it closed a yakety yak gap on the chart. There’s a small gap below this; however, that one is ceiling’d by a long sideways channel. I.e., technically its stock chart has shaped up recently. … Otherwise, if you watch as a whole the graphite companies that advertise here, you will notice rotations among them. Lately others have been able to shine as Zenyatta has taken a breather.

      September 25, 2013 - 5:46 AM

  • GoBucks

    Any idea out there about the economics of reclaiming tin from food cans? I know that several such endeavors have failed in the past…will the higher prices make these viable?

    September 24, 2013 - 12:32 PM

  • hackenzac

    Ucore has sn in the Ray Mountains of central Alaska on State lands, no Federal permitting needed,, thick alluvial deposits of tin and hrees for the scooping. They could get at it fast if the market calls for it.

    September 25, 2013 - 3:16 AM

    • vacuum

      Have a gander at “Ruby Batholith Alluvial Samples” spreadsheet located on the “Ray Mountains, Alaska” page, Ucore website.

      September 25, 2013 - 3:21 PM

  • vacuum

    SilverStandard has a lot going for it, but according to the resource inventory on its website–apparently no tin.

    Geodex gotSn property.

    September 25, 2013 - 5:36 AM

    • Robin Bromby

      The reports says Silver Standard’s Pirquitas project in Argentina will be producing tin by 2016 at the rate of 1,615 tonnes a year

      September 25, 2013 - 9:10 PM

  • Bill Keenes

    Very informative story

    – it’s the tin solder needed by almost every electronic device.

    Thankyou Robin.

    September 26, 2013 - 9:33 AM

  • Robin Bromby

    This on Friday’s trade in tin from the Commonwealth Bank of Australia …..

    Tin rallied 5.5% to a six‑month high of USD10.87/lb after Indonesia, the world’s largest tin exporter, signalled plans to displace the London Metals Exchange (LME) as the official venue to set the global benchmark price of tin. The move heightened concerns that supply will remain constrained after Indonesia passed a rule a few months ago forcing tin to be traded locally before being exported.

    October 7, 2013 - 5:07 PM

    • vacuum

      excellent information … And it’s interesting not just for tin, but seems to signal that trend of influence rolling eastward. … Thank you.

      October 8, 2013 - 2:27 AM

  • vacuum

    today the iconoclastic lampoonist Wm. Banzai at ZeroHedge posted a caricature of the Chairman as the Tin Man, which included the “Sn” symbol as a Periodic tile with atomic number and mass. The inclusion of the atomic detail makes the image not only literary allusion.

    image: http://www.flickr.com/photos/expd/10142791763/
    source: http://www.zerohedge.com/contributed/2013-10-08/wizard-ponz

    inasmuch as Time & SSI & Barrons covers typify broader market +/- turns per wide sentiment–then more narrowly, with respect to hedge fund managers and traders (the audience of ZH) this image, in conjunction with Sn trade locus moving eastward, suggests one might contemplate the effect of US monetary base supply upon Sn prices going forward. & etc.

    ; ^)

    October 8, 2013 - 4:26 PM

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