Tin prices crashed below $40,000 a tonne on Monday on concerns over poor spot demand and inventories rising on the London Metal Exchange (LME) and Shanghai Futures Exchange (ShFE).

Since March 8 when it surged to a record $49,500 a tonne, tin—used mainly as soldering material in electrical and electronic products besides as alloy and in automobile parts—has dropped by over 20 per cent until Monday.

Healthy supply

On LME, the benchmark three-month tin contract quoted at $39,495 a tonne against the weekend close of $42,165. On the Shanghai Futures Exchange, the metal dropped by 3,500 Chinese yuan to 3,38,000 yuan ($52,539) from 3,41,000 yuan in the previous trading.  

“It has been a quiet few weeks for tin, with LME prices grinding lower on a lack of spot demand and relatively healthy supply,” said James Willoughby, Market Analyst with the International Tin Association.

Rising inventories are another cause for concern. According to SHFE data, tin inventories have increased for the third consecutive week. For the week ended April 15, stocks increased by 19 per cent to a month-high of 3,045 tonnes.

Chinese support 

On the LME, opening stocks during the weekend were 2,875 tonnes with live warrants being 2,695 - an indication of poor spot demand. 

Willoughby said tin has been supported by China until now despite challenged. “Logistics and demand in Shanghai and the surrounding areas have been disrupted by Covid containment measures,” he said. 

Supply tightness in other parts of the Communist nation, with smelters being still reluctant to increase output, has supported the high local price and wide arbitrage.

Shanghai Metal Market (SMM) News said demand for tin was lukewarm as spot prices ruled above $340,000 ($51,844), but said the impact of the pandemic was weakening. 

Covid curbs

Fitch Solutions Country Risk and Industry Research (FSCRIR) had said in February, just before the Russia-Ukraine war broke out, tightening of Covid-19 restrictions in Malaysia and Indonesia will curb recovery in production.

The current drop in prices can partly be attributed to the rising Covid cases in China, which has now tightened its restrictions that even set off concerns in the crude oil market. 

However, Fitch Solutions sees the curbs as less significant from those witnessed in the past two years. Overall, analysts had expected tin prices to edge higher as demand was expected to be robust and increasingly outstrip supply. They had projected tin prices to average at $42,000 this year. 

The World Bank, however, projected a slight decline in prices this year after a huge rise last year in its “Commodity Outlook” released in October 2021. 

Price drivers

Analysts are yet to take a call on whether tin’s bull run has ended after rising repeatedly since the Covid pandemic set in. Prices were driven higher by a deficit of the metal due to rising demand from the electronics sector, while global production stagnated over the past decade.  

According to Fitch Solutions, the main reason for demand growth in tin to outstrip increase in supply was the Covid pandemic leading to increased sales of medical and home equipment and personal devices. All these products use tin for soldering.

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