Similar to other base metals, tin prices have started a gradual decline, starting from the beginning of June.
A market analysis of tin prices and trading volumes suggests a more bearish scenario for tin.
The chart below shows both a sharp drop in tin prices accompanied by heavier selling volume, also known as a “selling climax,” and may be perceived as a signal of a bearish market to follow.
According to the International Tin Research Institute (ITRI), the fluctuation of tin stocks has varied based upon tin prices in the market. Indonesian exports remain robust, with an increase of 10% in May compared to April. However, Myanmar tin exports decreased slightly again in May. This reduction of Myanmar output is expected to continue until the end of this year, as analyzed in detail in our monthly forecast reports.
Chinese VAT removal could lead to price convergence
Tin prices may also be influenced by the approval of a new Chinese policy that will directly impact the largest tin-producing company in China, Yunnan Tin Company.
This policy consists of the removal of the valued-added tax (VAT) structure, which taxes imports of tin concentrates and was supposed to provide a tax rebate of 17% on exports.
The catch? Exporters were never able to collect the rebate, so they ended up buying tin exclusively from domestic sources.
According to ITRI, by removing the VAT rebate scheme, the new policy will likely cause exports to increase and prices to rebalance between the London Metal Exchange (LME) and China. In other words, the two prices will likely converge — China’s may come up and the LME price may fall.
We believe tin prices will move close to support levels — and may eventually fall below this limit.
Considering the current situation and the sideways trend of commodities, tin should be analyzed closely this month.