While the low volume of tin on the London Metal Exchange has been an issue for some time now, its tin contract is now showing signs of entering into a period of volatility, according to a recent report from Reuters.
The spread closed this week and brought tin to its tightest point thus far in 2016. The reason for the squeeze? In part it’s due to Indonesia, the world’s largest exporter of tin. Shipments have been declining for the past several years, but that decline intensified in January with a 63% year-over-year drop.
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This substantial drop off can be attributed to the Indonesian government’s regulatory measures on miners and smelters operating on its nearby islands. In fact, Indonesian exporters are now required to provide permits in order to ship metal out of the country, and some producers used up their limited permits before they were renewed to begin February, according to tin industry association the International Tin Research Institute (ITRI).
While it may seem contradictory that weak demand for all metals has bred a situation where tin supply is tight, the fact is there is tin supply around it is just currently being sat on in China.
Last month our own Raul de Frutos stated that he only recommends buying tin in small quantities due to a rising dollar, China’s economic issues and falling commodity markets.
You can find a more in-depth tin price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds: