Are Tin Prices Losing Momentum?

Are Tin Prices Losing Momentum?The global tin deficit has been going strong since 2010, and it isn’t likely to let up any time soon. While inventories on the London Metal Exchange (LME) are dropping towards their lowest level in several years, Indonesia is holding fast to a policy implemented in September 2013 that requires all Indonesian tin trades be put through a local exchange before export.

Essentially, a committee sets the minimum bid price for Indonesian tin each week, and this minimum price is usually above LME prices, according to The Hindu Business Line. As the world’s largest exporter of refined tin, Indonesia is definitely putting a squeeze on the markets, and, as the Business Line reports, experts believe that the policy can’t continue as long as there are such strict limitations for tin on other exchanges.

A major consumer of tin, China is increasingly seeking alternatives to meet its demand for the metal. Since obtaining tin in its refined form puts the country at the mercy of the Indonesian policy, China is attempting to skirt the issue by importing raw materials from Myanmar instead.

Under these conditions, tin demand is set to rise. However, some analysts believe prices for the metal are losing momentum.

Demand forecasts

The Business Line notes that tin demand is likely to rise in the near future, with a growing global GDP set to support further consumption. Electronics businesses worldwide are also expected to improve over the next year, stimulating demand for tin used in soldering. Furthermore, tin is used in the production of lithium-ion batteries, and the emerging and expanding market for this new technology will create fresh demand for the metal.

Tin mining company Minsur seems poised to become one of the major players in the tin market in 2014, according to Bloomberg Businessweek. Owned by the billionaire Brescia family, Minsur is currently the world’s largest tin producer after China’s Yunnan Tin Company (SZSE:000960) and Malaysia Smelting (OTCMKTS:MSGCF). With its San Rafael mine in Peru, the world’s largest, as per The Financial Post, and its ownership of the greatest amount of known tin resources at its Pittinga mine, Minsur is readying itself to increase production in the face of a global shortage of tin.

“The only company on a good footing to expand is Minsur,” Cesar Perez, head of research at BTG Pactual in Santiago, told the news source. “The Brescia family is very good at timing.”

Before the implementation of its strict policies, Bangka, Indonesia was a key source of tin for many major consumers, including suppliers for smartphone makers Apple (NASDAQ:AAPL) and Samsung Electronics (KRX:005930). However, since the island nation restricted sales from illegal mining in Bangka in September, suppliers have been looking elsewhere for tin producers, and Minsur hopes to fill that role.

Tin price outlook

Despite high tin demand and low supply of the metal, tin prices appear to have lost momentum, MetalMiner states. While tin for delivery in three months closed February at $23,500 per metric ton on the LME, a 13-percent increase since the beginning of that month, March saw prices stagnate despite favorable market conditions.

According to the publication, prices are not likely to change unless a significant event occurs to effect supply or demand for tin. Otherwise, unless the base metals sector picks up overall, tin will remain stationary for now.

 

Related reading: 

Indonesia’s Tin Market Takeover

Tin Outlook: Analysts Expect Deficit, Higher Prices in 2014