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3-Month LME Tin Touches $19850/Ton; 23-Month Record

By David Fickling
Of DOW JONES NEWSWIRES

SYDNEY (Dow Jones)--Tin hit a fresh 23-month record Monday, moving above last week's high when a single lot of three-month futures on the London Metal Exchange traded for $19,850 a metric ton at 0719 GMT.

At least four more lots traded by 0740 GMT, representing a total of at least 25 tons of the metal, the most thinly traded on the LME.

Tin is the only one of the LME base metals to have exceeded the prices hit during the bull market for the complex in mid-April this year.

The metal is now at its highest level since it touched $20,100/ton on Sept. 1 2008, a fortnight before the bankruptcy of Lehman Brothers precipitated the global financial crisis and took any lingering strength out of that year's commodities boom.

But tin's run-up in recent days has confounded some market participants, with many arguing that its price performance is simply a result of the very thin trade in the metal, which makes any movements more pronounced.

Others have pointed to supply constraints to suggest that the trade has stronger foundations.

In a research note, BNP Paribas last week argued that the fundamental supply-demand picture for the metal was "alarmingly strong" and that "a supply crisis may be in the making".

The bank argued that with tin now less than 25% short of its mid-2008 peak, "it will be the first (of the LME metals) to reach a new all-time high".

Production of the metal has been in decline since 2005, as high-grade ore has declined and authorities in Indonesia, the world's biggest miner of tin, have cracked down on the environmentally damaging small-scale mining and smelting sector.

BNPP sees global production of refined tin at 323,000 tons this year and 340,000 tons in 2011, while consumption of the metal--mainly used for solder, in canning and by the chemicals industry--is expected to total 338,000 tons in 2010 and 355,000 tons next year.

On a more short-term basis, the supply-demand balance in the LME's warehouses puts tin in the second-tightest conditions after copper.

Inventory represented just 14.49 days of supply of the metal Friday, behind copper, at 12.65 days.

That has pushed the metal's futures curve into backwardation, a situation where longer-dated futures are cheaper than shorter-dated contracts.

Backwardation is a typical response to supply constraints on the short-dated contracts, which are most demanded by physical consumers.

The three-month contract is now trading at a $530 premium to the $19,320/ton 15-month contract.

A fortnight ago, three-month tin was at a $100 discount to 15-month.


-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; [email protected]