Tin: The unsung Metal that shines far too high By Sandeep Joon What an astounding rally tin prices has witnessed in the recent past. A lesser-known metal has slowly climbed to new highs. But a billion-dollar question is, whether the current bullish momentum will sustain in long run or not? Earlier tin was considered unworthy of notice because its market was smaller as compared to its peers like copper, zinc and aluminum. Tin market of Kuala Lumpur and LME are the key benchmarks for the tin prices worldwide.
Now lets have a glance at the remarkable journey of tin, which has witnessed breathtaking bull run in the past. This massive bull run which has started since the end of 2005, where prices were hovering around $6000 per tonnes went shooting up to more than $25000 per tonnes in 2008. That is astonishing jump of 400% in merely 2.5 years. In 2008 alone, it has climbed from $16000 per tonnes to $25000 tonnes, which is amazing rally of 53%. The key reason behind the bull run is the uneven production from Indonesia and erratic exports from China.
Hedge funds played a key role in pushing the price of tin to all time high levels. Following the U.S. subprime loan crisis and a series of rate cuts by the Federal Reserve, the flow of funds to the commodity market sharply rose, as commodities were considered a safe haven against the weakening dollar. So, tin is among the commodities that has gained from the flow of the new money.
This lesser known metal has many key uses like tinplate, tin alloy coatings, solder, pewter and chemical compounds. But in the current scenario the significant use of tin is in soldering. Growth in the Asian electronics industry and replacement of lead-based solders are the key triggers for tin consumption in the world.
Current Scenario of Tin Worldwide The record surge in the prices of tin is attributed to disruptions in supply coming out of Indonesia, which is having pronounced effect on world supply, decline in Chinese supply and increasing use of tin in soldering worldwide.
Indonesia being the world’s largest producers of Tin produced nearly 85,000 tonnes of Tin in 2006, surpassed only by China who produced 100,000 tonnes in the same year.
It is interesting to note that marginal costs, the level at which production becomes unprofitable is only $US10, 000 a tonne. The mining boom has created windfall profits for mining companies around the world.
Demand concerns have made the market more watchful of stock movements and prices are reacting heavily to inventory builds. 30% reduction in Indonesian Tin exports has caused the world demand forecast to outweigh predictions for supply by 30,000 tonnes.
Recently Indonesian Government cracked down on illegal tin miners and smelters and instituted more stringent export regulations. China and Indonesia are confirming supply limitations for tin, triggering a LME price above $25,000/metric tonne ($11.34/lb) for the first time. Currently, apart from the supply demand fundamentals, its price is also being affected by the investment demand. Despite the fall in production, tightness in the Chinese refined tin market has eased considerably since March because price elevation has curbed demand from packaging and electronic industries.
Lets Have A Look At Major Tin Belts In The World Major deposits of tin are in South America and it runs from Bolivia over to Peru and right up into the Western Amazon area of Brazil. The bigger one though is over in Asia. It starts on the island of Tasmania off Australia and runs up through Indonesia and Malaysia, Singapore and on up through Burma and Vietnam on up to the outer reaches of China and Russia.
China Factor… Thirsty Dragon For Tin The surge in the global tin prices is also due to decline in Tin production in China, which was partly due to extreme bad weather in January-February coupled with continuing shortage of concentrates and scrap for smelters.
Recently the April, 08 production of refined tin stood at 11,703 tonnes, 10.5% lower than in the same month of 2007, while cumulative production in the first four months of this year, at 42,183 tonnes, was 11.9% down. However, the recent earthquake in Sichuan has not had any impact on tin operations. It is worth noticeable that China remained a net importer of refined tin. Since last September, China has only been a net exporter in one month, December 2007, when a small burst of export shipments preceded the imposition of a 10% export duty from 1st January 08. China is also stepping up its imports of tin concentrates, which rose 16% YoY to 590 tonnes in April 2008.
Tin market will also be supported by the fact that the China has imposed export duty in order to cutrail exports because it being the net importer of this metal. China introduced a 10% tax on refined tin exports from January 1, 2008 in an apparent push to keep more for its own rampant demand. This tax is likely to dent exports, and in turn reduce global supplyIndonesia`s government will set a tin production quota of 100,000t/y starting in 2009 in a bid to reduce environmental damage in the main tin-mining areas, a senior mining official said. Details on production would be decided by the local government, said M.S. Marpaung, director of coal and minerals at the mines and energy ministry. "The decree may take effect in 2009 because some of the production plans are already in progress," Mr Marpaung said. Indonesia, the world`s second-largest tin producer after China, exported 118,555t for the whole of 2006, according to the state statistics agency, but some analysts say the figure was probably much higher because of smuggling and overproduction by small, independent smelters. Exports of refined tin from February. 23, 2007, when the government applied new tin export rules, to the end of December 2007, were estimated at 86,304.52t. Mr Marpaung said the latest move was aimed at protecting the environment around the mines. "We cannot only prioritise production increases," he said. Centuries of tin mining in the Bangka-Belitung islands, off the coast of Sumatra, have damaged the environment, prompting the government to ban exports of tin ore in 2002. As a result, several small smelters sprung up on the island, and production of refined tin soared, leading to a drop in prices. But a government crackdown on illegal tin mining in the islands since late 2006 has led to the closure of several of these small smelters, and has helped to push up the tin price.
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