Tin prices are likely to break new record highs this year and stay elevated in the longer term as rapid recovery in demand has outstripped the slow pace of supply growth. 

“The slow pace at which global tin supply has recovered from the Covid-19 pandemic has been outpaced by the rapid recovery in demand. Supply tightness should begin to ease by end (of) 2022 …,” said US research agency Fitch Solutions Country Risk and Industry Research (FSCRIR). 

Robust offtake

On Thursday, tin for delivery in April was quoted at 328,550 Chinese yuan a tonne ($51,878) on Shanghai Futures Exchange. On the London Metal Exchange, the metal was quoted at $,43,785 a tonne for cash and the three-month contract ruled at $43,700. 

Currently, tin prices, which have gained nearly 12 per cent since the beginning of this year, are off the record high of $44,284 seen on February 10. 

Fitch Solutions said tin prices will continue to edge higher over the years as demand will “continue to be robust and increasingly outstrip supply”.

However, the World Bank projected a slight decline in prices this year after a huge rise last year in its “Commodity Outlook” released in October. However, it concurred with FSCRIR’s views that “demand continues to grow rapidly, and global supply may struggle to keep pace.” 

Production rebounds

Market intelligence platform IndexBox has supported Fitch Solution’s views, projecting that tin prices will not return to pre-pandemic levels in view of high costs for energy resources. 

According to the International Tin Association (ITA), refined tin production rebounded from pandemic lows last year, led by Chinese Yunan Tin, and it will increase another four per cent this year. 

The current rise in tin prices can be attributed to the shutdown of the Laibin smelter of Guangxi China Tin Group for maintenance from February 10. ITA said the smelter, which has a capacity to produce 25,000 tonnes, would be shut for 45 days and result in 1,200 tonnes of refined tin being “unavailable to the Chinese tin market”.

Demand picks up during pandemic

The World Bank said growth in electronics and photovoltaic installations had significantly increased demand for tin. 

FSCRIR said the main reason for demand growth to outstrip increase in supply is the Covid pandemic led to increased sales of medical and home equipment and personal devices. All these products use tin for soldering.

“The resulting reduction of global refined tin stockpiles has continued to force prices higher, and left the market significantly exposed to price increases, that was especially seen during China’s power crunch,” Fitch Solutions said. 

Besides medical and home equipment, tin is becoming consumed in a big way by the greening of the economy as tin solder is used in photovoltaic cells. 

Price outlook revised 

The current bull run of tin has resulted in Fitch Solutions raising its price outlook for the metal to $42,000 a tonne this year from its earlier projection of $32,500. Similarly, the outlook for next year has been increased to $38,000 from $29,000. 

FSCRIR said prices have been on a strong uptrend since 2020 due to severe supply tightness resulting from Covid-19 lockdowns (especially in Malaysia and Indonesia, major tin producers accounting for a combined 30 per cent of global refined tin production in 2020). “Supply has yet to match up with demand despite easing slowly,” it said.

The World Bank said tin prices had increased for 16 consecutive months through August 2021 before falling a tad in September. It concurred with Fitch Solutions view that Covid lockdowns interrupted mine production in Indonesia and Malaysia. 

IndexBox said tin prices have been driven higher by a deficit of the metal due to rising demand from the electronics sector, while global production stagnated over the past decade. “Limitation of metal smelting in China due to environmental restrictions further propelled tin prices,” it said.

Fundamentals to ease

Research agency Fitch Solutions said tin market’s fundamentals are expected to ease slightly over 2022-2023, driven by supply increases. There are signs that this is already happening. 

While 80 per cent of Malaysia Smelting Corporation Berhad’s (MSC) production is back online after being curtailed due to Covid-19 lockdowns, Indonesia’s PT Timah is expected to eventually reverse its production cuts made in 2020 this year, encouraged by high prices.

On the demand side, record high prices for refined tin will result in demand growth slowing, it said. 

IndBox said growing demand will promote investments in tin production and result in prices decreasing.

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