The Hindu Business Line : Tin prices up 13.5 pc on demand-supply gap

TIN prices in the domestic market increased by 13.50 per cent or Rs 59 at Rs 495 per kg on Thursday touching a new level of 2004, in tandem with strong overseas market.

At the London Metal Exchange (LME), prices rose by about 43 per cent or $2,815 at $9,400 per tonne on Thursday as compared with $6,585 a tonne on January 2, beginning of the year.

"The price rise at LME is more sharper than the domestic market," a metal analyst said. The significant rise was due to demand-supply gap of 12,000 tonnes this year and a continued decline in LME inventories.

The benchmark cash/three months spread traded at $550 backwardations, indicating extremely tight supply.

Tin is used mainly in packaging and lead-free soldering and also used in the electronics, plating and chemical sectors.

"Tin prices in the domestic as well as overseas markets are expected to remain firm on tight Asian supply and continued global demand," he said. The tight concentrate position is constraining production growth.

Global demand is growing both in China and the rest of the world. Japanese demand is also recovering on the back of more buoyant demand for solder from the electronics and IT sector.

The bulk of the world's tin is produced by Malaysia, Indonesia, Thailand and Bolivia. The largest producer is Malaysia. The country most dependent on tin is Bolivia.

The largest single application of tin is in manufacture of tin plate (steel sheet coated with tin), which accounts for about 40 per cent of world tin consumption.

Solders account for the second largest use of tin (after tinplate).

"Demand of tin plate for packaging industry in the country is growing," he said. The domestic tinplate market, which has a size of 3,00,000 tonnes per annum (as per Indian Tinplate Manufacturers Association - ITMA), is categorised broadly into three basic market segments: edible oil and cashew, processed food and non-food sector.

"It is expected to grow at a moderate level of 5 per cent for the next five years," sources said.

World tin consumption exceeded supply by 15,000 tonnes last year and it is estimated that the supply gap would widen to 20,000 this year. Also, demand in South East Asia is growing by over 8 per cent every year.