Demand-supply imbalance to keep tin prices firm until year-end

Subramani Ra Mancombu Chennai | Updated on June 29, 2021

Metal’s offtake rises on pandemic, shipping delays affect supplies

Tin prices are likely to rule firm until the year-end on tight supply, robust demand and low inventories, especially at the London Metal Exchange, though they are off the 10-year-high last month.

Analysts in macroeconomic and country risk research house such as Fitch Solutions see prices weakening towards the year-end as supplies improve. But others such as CARE Ratings see further upside in the metal’s prices.

Tin prices had surged to their highest since 2011 to $32,975 a tonne last month on the London Metal Exchange (LME) but have retracted since to $30,364 for three months contract currently.

Premium for cash

On the other hand, tin for cash is sold at a premium of $32,079 a tonne primarily since supplies are unable to match demand. This month, LME had only 2,240 tonnes of tin stocks, indicating tight supply.

The stocks had dropped 76 per cent in April this year compared with the year-ago period.

Since the beginning of this year, tin prices have gained nearly 50 per cent. At current rates, prices have increased 140 per cent since the low witnessed in March 2020.

Prices have zoomed mainly on demand for consumer electronics, smartphones, electric vehicles (EVs) mainly lead-acid batteries and its increased use in lithium-ion batteries and electronic solders.

CARE Ratings said that demand for tin has grown during the pandemic as the metal’s use in cans increased.

Refined tin output

According to the UK-based International Tin Association (ITA), global refined tin production is 3.3-3.7 lakh tonnes with mine output being 2.7-3.1 lakh tonnes. The remaining is met through secondary production or recycling of tin.

This year, supplies have tightened as exports from Indonesia, world’s largest shipper and second-largest producer of the metal, dropped 24 per cent in the first quarter this year, mainly on shortage of shipping containers and delays. There were similar supply issues in China, the largest global producer, and Congo, supporting tin prices.

According to AfriTin Mining, which has tin assets in Namibia and South Africa, the tin market has consistently been facing a deficit and it was expected to continue to 2022. The deficit is mainly due to increasing regulations in producing countries and depletion of ore reserves.

Low investments

But, the UK-based International Tin Association says the shortage of mining capacity is due to low investments and not due to lack of tin resources in the ground.

AfriTin says that supply deficits are likely to prolong as new tin production projects are unlikely to commence in the near future, mainly in view of the current pandemic situation.

US-based ratings agency Fitch Solutions, in its outlook for the metal last month, said supply scarcity has driven tin prices to 2011 levels. The agency expects prices to weaken as availability improves.

However, it has raised its forecast for average tin prices to $23,000 for this year from the earlier $19,500 a tonne.

Reversal of output cuts

It said supplies would improve as producers such as PT Timah of Indonesia will reverse production cuts enforced last year in the coming months. It said Malaysia Smelting Corp will commission its new plant at Pulau Indah island in Klang district later this year.

Fitch said it expects tin production to increase 12.5 per cent this year, which would far exceed the last 10 years’ annual growth of 0.2 per cent. Supplies would continue to improve beyond this year which could result in the metal’s prices softening to 2023.

CARE Ratings, justifying its views on tin prices ruling firm, said Malaysia Smelting Corp has ruled out returning to pre-pandemic capacity until the year-end.

Though China has said that it would offload its reserve stocks to bring down prices of non-ferrous metals, the ITA said it would not impact tin as China’s strategic reserve agency did not have any stock.

Published on June 24, 2021

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