Though tin prices have dropped by over 12.5 per cent from a six-month high seen during July-end, the metal will likely edge higher in the months ahead on looming supply crunch, say experts.
Currently, the 3-month tin contract is quoted at $25,475 a tonne - a three-month low, while for cash, the metal is quoted below $25,000.
According to Jeremy Pearce, Market Intelligence and Communications, International Tin Research Association, the metal has dropped from the highs of $29,000 in July as deteriorating economic indicators from China have weighed on all base metals.
Research agency BMI, a unit of Fitch Solutions, said a number of regulatory changes point to looming supply crunch in the global tin market. But renewed strength of the dollar is capping the growth in tin price.
However, it said it was maintaining its tin price forecasts for 2023 at $25,000. BMI said it anticipates prices will edge higher over the coming months as the seaborne tin market starts to see a fall in supplies as the mining ban of Wa province in Myanmar rolls on and Indonesia’s export ban comes into force.
“While Mainland Chinese demand remains tepid despite the country’s reopening, the banning of tin mining in Myanmar’s Wa region as well as Indonesia’s tin ingot export ban will ensure the global tin market becomes tighter in the coming months,” it said.
China, focal point
Pearce said anticipation surrounding Myanmar’s August 1 mining halt bolstered prices amid tepid fundamentals. But since then, the metal has shown a pronounced decline.
“As uncertainties persist, China will likely remain the focal point in the fourth quarter,” he said.
Trading Economics said the halt in production in Wa will likely result in the supply of raw materials for Chinese smelting being affected. It will pose challenges to matching earlier production levels.
However, global semiconductor sales, which serve as a proxy for tin soldering usage, recorded a year-on-year decline of 17.3 per cent in June, it said.
BMI said its forecast reflects continued weaker demand over 2023 as worsening economic indicators and elevated levels of inflation mean weaker consumer spending on electronics, a major source of tin demand. The short-term demand (2022-2023) in the global consumer electronics market will lag behind that of 2021 given the high base rate and the loss of momentum in consumer spending after the vaccine rollout-driven rebound and rampant inflation, it said.
BMI forecast refined tin consumption growth to ease, “with just 0.3 per cent year-on-year (y-o-y) growth in 2023 compared with 0.5 per cent y-o-y in 2022.
Surplus may shrink
On the other hand, global tin stocks have increased, particularly from June 2022 onwards, which will limit the potential for price increases, it said.
BMI sees market surplus will shrink in 2024 as the Myanmar ban impact will be felt.
The upside risk to tin price could be a stronger pickup in Chinese tin demand in the coming. Similarly, a slower-than-expected ramp up in refined tin supply from China could result in tin prices remaining more elevated.
On the downside, further strengthening of the dollar and weakening of global demand would force prices to lower than pre-Covid levels, it said.