Commodities

Electronic gadgets, batteries, alloys, solder items set to get costlier as tin prices soar

Subramani Ra Mancombu Chennai | Updated on August 04, 2021

Rates rise to record as supply fails to match demand

Products ranging from solder material, lead-acid batteries, smartphones, laptops, tablets and other electronic products, and chemicals and alloys, including copper, are set to get costlier if they have some tin in them.

Manufacturers are set to be under pressure as tin prices, which have increased about 70 per cent since the beginning of the year, have raced to a record high in the global market on strong demand and a disrupted supply.

The outlook of a further increase by the year-end doesn’t augur well either for industry or consumers.

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

On Tuesday, tin prices for cash on London Metal Exchange (LME) were quoted at $36,473 (₹27.05 lakh) a tonne, while 3-month contracts ruled at $34,550 (₹25.62 lakh).

Supply disruptions

Tin prices have increased mainly due to supply disruptions resulting from the spread of the Delta coronavirus variant across Asia and Africa, in an already tight market.

More importantly, the pandemic has peaked in Myanmar, the world’s third largest producer, and this is set to worsen the supply-demand scenario. Supplies have also been affected by the protests and strikes that followed after Myanmar defence forces staged a coup to displace an elected government.

Steel cos seek quality control on tin plate imports

Drought and power curbs in the Chinese province of Yunnan, the main producer of the metal in the Communist nation, also affected supplies.

The UK-based International Tin Association (ITA) said production in Yunnan was affected in June, while maintenance carried out by the world’s largest producing firm — Yunnan Tin — exacerbated the situation.

The maintenance work will be completed this month, bringing back significant volume to augment supplies. ITA said tin production, particularly in Myanmar, was affected in May due to labour shortage.

Industry usage

Movement of labour between Yunnan and Myanmar continues, affecting production. But the output will likely increase over the next few months, ITA said.

Its study last year revealed that solder accounts for 49 per cent of tin consumption, followed by chemicals (18 per cent), tinplate (12 per cent) and batteries (7 per cent).

ITA said growth prospects for solder were bright, particularly with regard to 5G-related markets, while those of canned food were good as consumption has increased during the pandemic. Similarly, battery use was boosted and a significant proportion of electric bikes in China uses tin, it said.

Tin use by application (in %)

Industry

Usage

Solder

49

Chemicals

18

Tinplate

12

Batteries

7

Alloys

5

Other

9

Source: International Tin Association

Outlook raised

Fitch Solutions Country Risk and Industry Research (FSCRIR) has raised its projections for tin price movement this year to $28,000 a tonne from $23,000 earlier.

The agency said a rapid increase in demand has outstripped the slow pace of tin supply recovery during the Covid pandemic. It expects prices to peak only before the year-end, which means they still have legs to rise further.

“We expected that the limited supply growth will persist in the third quarter this year,” it said, adding that, as a result, the global refined tin inventory has declined.

Supply growth will be limited in the current quarter in view of the Covid shutdowns in Indonesia and Malaysia affecting the reopening of mines and smelters. Both these countries made up 30 per cent tin production last year, FSCRIR said.

Demand rationing

Prices will peak in the fourth quarter as only the supply tightness will ease. The market will then head lower but the current record prices will result in rationing of demand by electronic manufacturers, as they will struggle to pass on the spike to consumers, the agency said.

Relaxing lockdown curbs will also boost exports, it added.

The current situation in the tin market owes to a persistent supply deficit in the preceding years, which is expected to continue until next year.

Supplies will ease once tin production projects go on stream, though not in the near future.

Currently, tin stocks on the LME are 2,290 tonnes, with warrants for 1,060 tonnes cancelled. This means 1,060 tonnes are being taken out of the LME warehouse, probably for cash sale. The stocks in the LME warehouse are lower by 70 per cent from the year-ago period.

Shipping delays

According to the ITA, global refined tin production is 3.3-3.7 lakh tonnes, with mine output at 2.7-3.1 lakh tonnes. The rest is met through secondary production or recycling of tin.

This year, supplies have tightened as exports from Indonesia, the world’s largest shipper and second-largest producer of the metal, dropped 24 per cent in the first quarter, mainly on shortage of shipping containers and other 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 this is expected to continue into 2022. The deficit is mainly due to increasing regulations in producing countries and depletion of ore reserves.

Published on August 04, 2021

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