By Melissa Pistilli-Exclusive to Tin Investing News
On Friday, tin futures for three month delivery on the London Metal Exchange (LME) closed at a low of US$11,750/tonne after falling to US$10,300/tonne, its lowest level since January of 2007. On Monday, tin briefly reached a high of US$15,200 to close at US$13,600/tonne. Tuesday morning, tin was up 5 per cent over Monday’s close to $14,300/tonne. A rebounding Euro against the dollar led to gains in commodity prices across the board.
Since the beginning of 2008, tin prices on the LME have fallen over 70 per cent. In October alone, tin prices have lost almost 50 per cent, far from the US$25,500/tonne high reached in May.
Although lower tin prices may appear to be a sign of a faltering market, many metals analysts say the supply market remains increasingly tight and a deficit is expected this year. “There is a huge contradiction of what is happening to the price and the underlying state of the market,” said Peter Kettle, manager at tin consultancy ITRI.
Like most commodities in the industrial sector, the tin price has fallen victim to the global financial crisis. And as the crisis deepens we can expect continuing drops in price, with some analysts predicting lows of US$9,000/tonne.
However, most believe the fundamentals in the tin market remain strong. Tin is the only metal on the LME that is trading at a premium over the three-months price in cash material trading, a phenomenon known as backwardation. Currently in Europe, tin premiums are trading at between US$200 and US$450/tonne over LME prices.
Demand may be slowing in nations like the US, but some analysts and traders believe the low LME prices will rebound before next year because 20 per cent is earmarked for delivery. “I am sure you will see some slowdown in business, but I think you are going to see this market get very very tight,” said one trader to Thompson Financial News.
Supply is tightening and will continue to do so. Once demand levels come back up, we should see the tin price rebound significantly. Some believe the price will rebound back to the US$16,000 to 17,000/tonne range in the near future.
LME warehouse inventories for tin have fallen to the lowest level since July of 2005 by 500 tonnes to 4,080. Output from Indonesia, the world’s leading tin producer, is falling drastically; the world’s second-largest tin producer, China, is tightening its exports; and the tin rich eastern provinces of the Congo are embroiled in a brutal conflict with militia rebels.
Output in Indonesia is falling because many independent smelters are struggling and even the nation’s major producers like PT Timah and PT Kobah are announcing cutbacks due to low tin prices. For the year, Indonesian tin output of refined tin is down 20,000 tonnes from last year’s 100,000 tonnes.
Although tin consumption worldwide “was seen coming down this year and next,” reported Anna Stablum of Thomson Financial News, “production both of refined tin and at the mine level was seen falling even more.”
Despite a noticeable slowdown in demand for tin in the chemical industry, consumption in the solder industry, which represents 50 per cent of the market, is expected to remain strong. “The solder industry is a big unknown at the moment — most of the solder business is in Asia and people are still looking at decent growth r ates within China and the emerging economies,” said Kettle. China, which has now become a net importer of tin, represents about 55 per cent of the global solder industry.
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