Tin Prices Climb Above $18,000 as Investor Sentiment Shifts

Tin prices rose sharply on Monday above $18,000 per metric ton for the first time since March 2015.

Tin hits a 16-month high
Tin hits a 16-month high. Source: fastmarkets.com

Tin prices sold off in May after data showed a surge in Indonesian tin exports for the month of April. That caused many analysts to call for a comeback in exports as more producers in Indonesia received new export permits.

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However we pointed out in May that the sell-off was a normal reaction after the huge gains earlier this year and that nothing suggested a reason to call for an end to tin’s rally.

Investor Sentiment Changes

Now, tin is acting strong but we are witnessing more bullish behavior by investors for many industrial metals. That’s now what we were used to during the past five years. This investor behavior suggests that a broad recovery in commodity markets is underway. This improved sentiment is helping each industrial metals make headway.

Exports from Indonesia in May came in at 5,378 mt, a 22% decline compared with April’s figures and a 14% year-on-year fall compared to May 2015. The granting of new export licenses led to the sale of stockpiles in April. The lower figure in May improved investors’ sentiment on tin, as the figures represented a normalization of  tin shipment volumes following the April surge.

The metal has risen every day since June 28, erasing an initial drop following the U.K.’s vote to leave the European Union. Over the past few days, expectations of further easing by central banks pushed up commodities as a whole.

Dollar index surged following Brexit vote but momentum has vanished ever since. Source: stockcharts.com
The U.S. dollar index surged following the Brexit vote, but momentum has vanished since. Source: stockcharts.com

The U.S dollar surged rapidly following Brexit vote but the momentum vanished as initial panic eased, having investors now betting that the U.S. Federal Reserve will hold off on raising interest rates at all this year, instead of doing so twice as officials had projected.

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That could keep the U.S dollar from strengthening rapidly and generate demand for dollar priced commodities like tin.

What This Means For Metal Buyers

Buyers bought tin forward earlier this year at lower prices. Since 2011 until now, a “buy down the market” strategy has worked pretty well, but the market environment has changed. Tin buyers should be prepared for different scenarios, or your budget could get hurt.

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