Tin Hits An 11-Month High But Don’t Get Carried Away With This Rally

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All base metals have risen in price since February on the London Metal Exchange but, so far, the rally in the base metal complex looks like a normal reaction in a bear market.

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However, tin is starting to paint a more bullish picture. The metal hit an 11-month high in March, breaking above resistance levels at $16,500 per metric ton, a ceiling which had previously prevented prices from moving above it.

3M LME Tin price - source: fast markets.com

3-month London Metal Exchange tin price. Source: Fastmarkets.com

Tin exports from Indonesia are falling this year.  Indonesia’s February exports of refined tin came at 4,505 mt, declining 25% year-on-year. February’s decline came after a 63% y-o-y decline in January. The decline in exports was caused by recent flooding on the island of Bangka and delays in exports as Indonesian exporters struggle to receive new certifications.

Also, there are some macro-factors driving tin prices up. One of them is the short-term recovery in oil prices, which are now trading near $40 per barrel. The rally in oil prices gave a boost to the rest of the commodities complex and, in particular, base metals

Oil prices trying to make a come back

Oil prices are trying to make a comeback. Source: MetalMiner analysis of @StockCharts.com data.

A weaker dollar in February also contributed to a price increase across dollar-denominated commodities, including, of course, the industrial metals complex. The European Central Bank’s decision to cut its main interest rate to zero will play a big role in currency markets and it gives us more clues on the direction of the US dollar for the rest of the year as other central banks continue to cut rates to attempt to stimulate their economies.

Can Tin Keep Moving Up?

Tin is acting very strong this year, showing investors’ interest in the metal. However, we haven’t seen a significant recovery in commodity markets and, unless that happens, it’s hard to imagine tin flying by itself. China’s stock market is not yet out of the woods and further declines could add more bearishness to commodity markets. It’s also far from clear whether the rally in oil prices is sustainable or not and what the dollar will do next.

3M LME Tin since 2012

3-month London Metal Exchange tin since 2012. Source: Fastmarkets.com.

Another thing to consider is that tin was one of the worst performers in both 2014 and 2015. Even after this recent rally, tin prices remain low compared to historic levels. In addition, for a real turnaround in base metal prices, we would like to see more liquid metals such as aluminum and copper leading this rally. They are not.

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Finally, customs data revealed that tin ore imports from Myanmar in January soared to an all-time record of 72,436 mt (gross weight), a 239% y-on-y increase and a 66% rise from the tonnage imported in December. Myanmar’s rising supply could make up for Indonesian’s falling production, keeping a lid on prices.

What This Means For Metal Buyers

Tin prices are acting strong and buyers should act accordingly. However, it’s still not clear whether this rally is going to last. There are still drivers that need to improve for us to think that tin is just going to rise without ever looking back. Tin prices might need to consolidate for some time and other markets have to improve before this rally continues.

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