Tin continues to emerge as a ‘Technology Metal’ as Electronics industry boosts demand
Tin continues to emerge as a technology metal — and as a stable one. First, the recovery in the semiconductor sector is conducive to tin demand (it goes into the solders used in these electronics). Second, while the other elements in the base metals market have recently suffered severe gyrations, the tin price has been little changed.
Of course, tin was a technology metal back in 3000 BC when it was combined with copper to make bronze. So, 5,000 years as a technology metal — hard to beat that one.
Macquarie Capital, in their daily metals market report, say the global shipments of semiconductors, which give a guide to demand for tin in solder alloys (accounting for roughly 50% of the metal’s use), in December recorded their eighth consecutive month of year-on-year gains. Total December semiconductor shipments hit $306 billion, up 4.8% on the same month in 2012 and a new all-time record. “Our semiconductors team sees global sales rising 11% to $338 billion in 2014 and this should bode well for tin demand going forward following two very sluggish years from mid-2011 to mid-2013,” the Macquarie report noted.
Most base metals had another unsettled week. Copper sank to a nine-week low on Tuesday, then rallied strongly; lead followed the same trajectory. Zinc hit an eight-week low then shot up 4%. Tin on Friday closed in London at $22,180/tonne and traded within a sedate range of just $400/tonne over the entire week, a sea of calm as turbulence raged all around. Stocks of tin in London Metal Exchange warehouses total just 8,940 tonnes, an abnormally low level.
The only cloud on the horizon is that China has, for the first time in two years, become a net tin exporter, with the domestic market oversupplied, and this may continue for another few months; if London tin prices continue to climb, the Chinese may well push more metal into the market. And more tin is now coming out of Indonesia.
Stephen Briggs, the commodity man at BNP Paribas in London, thinks tin producers will struggle to keep up with rising demand. Mine output recovered last year, but mainly in just China and Burma. “We cannot see as strong a rate of global growth (in mine output) in either 2014 or 2015,” he said.
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New mines are unlikely to make any significant contribution until 2016 at the earliest, although output from existing mines in Australia (Renison), Brazil (Pitinga) and Bolivia (Huanuni) should continue to improve. Briggs can’t see the two main producing nations, China and Indonesia, lifting their total tin production by much more. Chinese mines are battling against declining grades and pollution problems, while Indonesian production had fallen heavily in the past two years.
“In all, we doubt that world tin mine output will rise by much more than 5% between 2013 and 2015 (against an 8% expected cumulative growth) despite what will, in our view, be an attractive price environment,” says Briggs. He suspects China built up stockpiles of mined metal, which would explain why that country is now unloading on the world market. BNP estimates Chinese stockpiles might be as high as 20,000 tonnes.
He expects there to be a global 8,000 tonne deficit of tin this year. That may not sound like much — until you remember there are only seven mines in the world that annually produce more than 5,000 tonnes each; only two, San Rafael in Peru and Gejui in China, sell more than 20,000 tonnes of tin (in concentrate) a year (although Indonesia‘s dredging operation by PT Timah comes close). The top 10 mines produce, between them, 103,000 tonnes a year, just over a third of global demand. And we know that San Rafael’s hard rock resource is due to be exhausted within three years (although owner Minsur plans to treat the massive piles of tailings to extract additional tin).
There are two points to make about the BNP note. One, while Chinese stockpiles are thought to be large, the country exported 825 tonnes of refined zinc in October, not enough to cause tremors in the market.
The other point is that China will certainly not export too much: it is conserving supplies of all metals, and stockpiling, too. I suspect that the exports will be limited, and that someone in China knows at which point no more tin will be sold off. China will keep plenty of tin (as it is with tungsten, molybdenum, rare earths and antimony). Moreover, if the Chinese electronics industry recovers as part of the global growth, then demand from Chinese semiconductor makers for tin solder will also rise.
BNP thinks tin could easily reach $27,000 tonnes within 15 months, although any new mine supply after that period could wipe the froth off the market.
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