The outlook for tin has dulled following weakening macroeconomic fundamentals, a strong dollar and higher inflation. This has resulted in analysts cutting down the price forecast for the metal this year and 2023. 

The gloomy outlook for tin, used in plating cans, bearings and for soldering in electronic and electrical products, has dragged its prices by 11 per cent over the past month. The metal has lost over 52 per cent since the start of 2022.

Currently, the three three-month London Metal Exchange (LME) contract is quoted at $18,101 a tonne, while for ready cash delivery the price is $18,125. 

Price forecast

Research agency Fitch Solutions Country Risk and Industry Research (FSCRIR) said, “We anticipate that prices will remain pressured over the rest of 2022 and into 2023 as the global economy continues to slow and major economies fall into recession.”

The research agency said while supply has remained “fairly consistent”, the demand outlook has fallen. 

In view of these developments, Fitch Solutions has lowered its tin price forecast for 2020 to $30,000 a tonne from $31,650. For 2023, the forecast has been reduced, rather sharply, to $20,000 from $33,000.

Combination of factors

The lowering of the price forecast comes amid a significant drop in prices in the second and third quarters this year. “A combination of demand-side factors caused a major decline in prices in past months and will continue to pressure prices into 2023,” it said. 

Higher inflation will cut consumer spending on electronics, a major source of tin demand. Additionally, the dollar’s strength is capping demand for a range of industrial metals priced in the currency, while negative market sentiment has placed a lid on commodity prices in general, Fitch Solutions said. “Our forecast reflects continued weaker demand over the rest of 2022 and slight improvements in supply as mining and smelting operations are more fully normalised across the market,” it said.

Weak economic outlooks for the US and for mainland China will push prices marginally lower than the current price for the rest of the year. In particular, lower physical tin premiums — which have fallen substantially since mid-2022 — indicate a better supply-demand balance, it said.

Indonesia factor

However, tin market analyst James Willoughby said the underlying tin market conditions may support prices in the final quarter of the year, despite macroeconomic pressures. “There are early signs that demand may be beginning to ramp up for the holiday season. While this will likely peak lower than in previous years, it may cause some tightness in the market given slight forecast supply slowdowns over the period,” he said.

Analysts are pointing to Indonesia, the world’s largest exporter of the metal, as one factor that can force the market to move up. Jakarta is considering a ban on tin export to boost its processing industry. However, the Joko Widodo government said it has not decided on banning exports yet or when it will impose the ban.

Buyer exhaustion

Metal Miner said tin prices have turned bearish of late as “buyer exhaustion” overtook the market after a nearly two-year-long bullish trend.

Fitch Solutions said global tin stocks have increased in 2022, particularly from June onwards, which will limit the potential for price increases. “Through 2021, low levels of tin inventories driven by reduced output due to Covid-related restrictions helped to support the metal’s extensive rally and added to volatility in prices,” it said. 

Low stocks with the LME pushed the prices higher when they were almost zero at the start of the year. “The recovery in inventories which we have observed over 2022 will place a lid on prices, eliminating chances of the strong rallies that were seen last year,” Fitch Solutions said. 

However, fairly low liquidity on the LME could result in higher volatility being a feature of the trading in the short term.  

Upside risks

According to Shanghai Metal Market (SMM) News, production of tin by PT Timah, which accounts for 7 per cent of the global output, declined 26 per cent in the first half of this calendar year to 8,805 tonnes compared with the year-ago period. However, Indonesia exported 58,178.69 tonnes of tin during January-April this year, up 11 per cent year-on-year.

Fitch Solutions said its outlook had upside and downside risks but after tin prices collapsed in May and June, it is “skewed to the upside” as in the longer term supply growth will be limited by a thin project pipeline. “A slower-than-expected ramp-up in refined tin supply from China, Indonesia and Malaysia could result in tin prices remaining more elevated than we currently forecast in 2022,” Fitch Solutions said.

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