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Strictly Boardroom:

The adventures of Tin Tin
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Monday, 28 April 2008


IN MORE than 100 Strictly Boardroom columns, tin has hardly had a look-in. This week Allan Trench corrects that injustice – with a little help from his friends.

Strictly Boardroom has been trying to cover those parts of the Periodic Table that other columnists do not reach for a considerable time – but somehow a pit stop at atomic number 50 has not yet eventuated.

This week we finally put that wrong to right, prompted by one reader and self-proclaimed ‘Tin Bull’ who was kind enough to point out tin’s omission from previous columns (and also to disclose his shareholding in emerging tin company Kasbah Resources at the same time).

Now Strictly Boardroom has no shares in Kasbah – or in any other tin company – but perhaps he should have.

The tin ‘Bulls’ certainly seem to outnumber the tin ‘Bears’ out there, despite the metal already running hot on the London Metal Exchange at more than $24,000 a tonne.

On a recent trip to Santiago, Strictly Boardroom was lucky enough to meet one trader with a large, and very healthy, open long position on the smallest LME metal contract.

Such was his confidence in the price outlook that he was buying all the drinks – for a room full of people. Perhaps that’s not surprising when the 12-month price graph for tin looks virtually exponential.

So, with the help of tin guru Peter Kettle of ITRI, here are 10 things you may or may not know about the current state of play in tin.

1. Tin finished joint top (along with phosphate rock) of an informal analyst poll at CRU for the commodity most likely to have a 2011 price significantly higher than its average 2007 price. Having risen some $10,000/t over the past year, tin is already well on its way to fulfilling this lofty expectation.

2. Tin prices may be high, but have been higher in the past. In real terms, tin reached more than $35,000/t back in the late 1970s and early 1980s.

3. Tin prices still have some catching up to do after under-performing most other LME contracts in the five years from 2002-2007. Lead and nickel took out the top places (both exceeding 400% gains) with copper and zinc breaking the 300% barrier. Tin (at more than 250%) did, however, outperform aluminium which didn’t quite double in price.

4. Tin demand is soldering on, so to speak. In fact, a revival in tin usage sees 10-year moving average consumption growth at 50-year highs of around 4%.

5. Tin consumption is booming in China – where else – and on the wane in Europe and North America. Solders form the bulk of demand but diverse uses such as tinplate, chemicals, glass, brass and bronze and pewter round out the demand side.

6. Asian companies dominate the list of top 10 producers, taking out seven places. Yunnan Tin leads the field with 2007 production of refined tin exceeding 60,000t. Next comes PT Timah of Indonesia (58,000t) with Minsur of Peru taking third place (just shy of 36,000t)

7. World mine output of tin has shifted north from around 200,000t per annum up until the early 1990s to approaching 350,000tpa now.

8. China and Indonesia dominate tin supply, making up around 75% between them.

9. With Indonesian supply having peaked in 2005 and Chinese consumption outpacing production increases, there is opportunity for new players to capture market share. Among those countries set to increase production are Argentina, Bolivia, Brazil, DR Congo and Morocco – and, of course, Australia.

10. Like other commodities, funds have taken a shine to tin as another place to make hay while equities are down in the dumps. Fund interest has been accompanied by positive fundamentals as tin stocks have fallen on production problems in Indonesia and China. ITRI forecast a modest deficit for 2008, as for 2007.

Job done: and sincere apologies to all tin fans that it took so long to reach your favourite metal. And the next feature metal is…?

Allan Trench is Adjunct Professor of Mine Management & Mineral Economics, Western Australian School of Mines and is a Non-Executive Director of Pioneer Nickel, Navigator Resources and Enterprise Metals. He leads the copper analysis team at the CRU group ([email protected]).

Peter Kettle can be reached at [email protected]