Technology metal tin is on the rise
Commodities have had been having a terrible time. U.S. farmers are seeing the lowest wheat prices in many years. Scotiabank in Toronto this week tells us potash prices are falling again (down to $315/tonne in July), and global potash shipments are expected to fall from 63 million tonnes in 2014 to under 58 million tonnes in 2015. Indeed, China is about to become a net potash exporter, which will impact the market even further. Iron ore and coal are out for the count.
Scotiabank’s commodity index is now “well below” the bottom touched in the Great Recession of 2008-09, the bank said. While some individual commodity prices are above their levels back then, as Scotiabank says, “current weakness is broader based and reflects a prolonged period of sub-par global growth”.
Now, overnight, the International Monetary Fund has warned against central banks raising interest rates and tightening fiscal policy. Instead the IMF wants governments to maintain spending in spite of the still high public sector debts left over the 2008 global financial crisis. The agency is predicting that a struggling Chinese economy will force central banks to keep interest rates low.
What this means in short is that, if the IMF is right, commodities are going to continue to drag along the bottom.
So what is happening to tin?
Base metals have been battling hard this week; on Monday they all (but one) went down a little; Tuesday saw nickel fall $300/tonne in one session, with copper and zinc making minor falls. Wednesday was better all around. But tin has been shining:
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Monday saw it rise by $310/tonne.
Tuesday saw it rise by $480/tonne.
Wednesday saw it rise by 545/tonne.
Wednesday saw London Metal Exchange inventories drop $910 tonnes to 5,820 tonnes. That is sufficient tin for just under seven days of world consumption. Not even a week’s consumption.
Suddenly, someone is taking a keen interest in tin. As I have argued before on InvestorIntel, many people overlook tin’s role as a technology metal. Its greatest use is in solders for the full range of electronic products. It is used in various chemical, as well as in toothpaste and cosmetics. It may become a fuel additive, and the addition of tin can prolong the life of the lithium-ion battery. (And even its traditional role of lining food and beverage cans is looking rosy as rising living standards in the developing world spur demand for canned products.)
In 2013 the World Bank said we may have only 19 years left where the known resources of tin would sustain 2013 levels of production. All those smartphones and other electronic devices have placed a big strain on tin supplies. In its then latest Global Economic Prospects report the World Bank had analyzed U.S. Geological Survey figures regarding resource scarcity, that is, the years left where production can be maintain at present levels
Just months earlier, an equally stark picture was being painted by Peter Kettle, the public face of the International Tin Research Institute. As he pointed out, there was only one new tin project around the world in feasibility stage. There were four more at scoping stage, just 10 with complaint resources. Globally, there were only 130 known tin deposits — fewer than half the number of rare earth ones.
Now Indonesia, the world’s top tin exporter, has tightened regulations on tin exports. They want to curb illegal mining; last year Indonesia exported 76,000 tonnes of refined tin, but just 27,550 of those tonnes came from the main legal producer, PT Timah. As Caroline Bain of London-based Capital Economics points out, Pt Timah provides 90% of the country’s legal exports. So that gives you an idea of the scope of the smuggling.
Anyway, keep an eye on the tin price. That price has been kept low by the general commodity situation, but also because Myanmar has been providing cut-price concentrate to the world’s biggest user, China.
If Indonesia is successful at reducing the smuggling, and the Burmese alluvial mines are exhausted, there could be squeeze on supply. And there are few mine projects at the ready-to-go stage. Back in 2013, ITRI estimated the average time (taking into account all proposed mining projects) to get into production was 12 years.
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