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Tin to buck weakness after Chinese destocking ends

JAKARTA (Commodity Online): Tin futures had an amazing run earlier during the year following extreme production disruption in major producing countries and soaring demand. Even though the market has been on the back foot since the commodities sell-off, fundamentals still warrant higher prices of the metal.

Tin prices have fallen almost 25 percent from the peaks it scaled during April 2011 at the London Metal Exchange, but is expected to find technical support at Rs.24000 per tonne, said analysts.

Tin price performance in the recent months were in contrast with other base metals such as copper, zinc lead etc have recouped enough strength to recover at least some of their earlier losses. Chinese destocking efforts have affected the market sentiments, but it is expected to wind up soon.

Hostile weather conditions and unfriendly government policies towards mining in Indonesia, the largest exporter of the metal, was one of the major concerns in the market. But the conditions have improved off the late, and exports from the country picked in the first quarter of 2011. Export from Indonesia was seen rising 37.6 percent during the month of March alone, followed by a 22 percent increase in April.

In addition, the newly formed government in the Democratic Republic of Congo has signed decree which requires the government to disclose all the natural resources contracts that are signed.

This move is expected reduce corruption in the system and make in more transparent, increasing the possibility for the tin production from the country to rise. Congo accounts for 5-7 percent of the global tin production. The recent run up in tin stocks at the London Metal Exchange also weighed on the sentiments of tin.

Another noticeable market development was the 35 percent rise in tin stocks at the London Metal Exchange, but the phenomenon is not expected to last as it has occurred due to the destocking efforts from Chinese mills. This has resulted in rising in exports of tin of China. Nevertheless, this is expected to wind up soon, a report from Barclays reports.

Tin market, however, remains to be in a deep deficit and analysts expect this deficit to narrow only by 2013. The lack of mining investments will also compound the effects of already hostile products norms and weather on the market.