LME tin prices surged from December 2018 into late February 2019, rising almost weekly throughout the period. In that period, the LME tin price hit $21,870/mt at its short-term peak — up around 20% in about three months.
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Once prices turned around, weekly declines became more of the rule as the LME price gave up 8% of its recent gain, with the LME price now at $20,400/mt.
A somewhat similar price trend occurred one year prior, when prices rose quickly between December 2017 and January 2018. The price trend formed a temporary flag formation following the price peak, after which prices turned sideways in a bearish triangular pattern before moving downward overall once again for some months. The LME price finished out 2018 by moving sideways.
Will LME tin prices repeat last year’s performance by peaking early then trending downward for many months into 2019? Or can we expect some different price action for tin this year?
Let’s look at some additional indicators to glean any possible insights.
Historically Speaking, Tin Prices Tend to be Volatile
Looking at a longer-term view, we see that LME tin prices tend to spike and fall again. Recent tin price movements are actually somewhat tame when compared to the 2012-2014 period (when the price spiked and fell in more extreme movements).
Smaller trading volumes for the metal may factor into this greater volatility. Trading volumes can help provide a clue about what we might expect next for LME tin prices.
Consumption of the metal increased by 2.5% in 2018, compared with the year prior. This year, the International Tin Association (ITA) estimates global demand for tin will contract by 1%, with a usage forecast of 357,000 tons for 2019. On a related note, this year the ITA expects a production surplus for the first time since 2013.
Over the longer term, however, demand should continue to rise as tin becomes more integrated into various areas of higher-tech production methods related to high-capacity anode electrode materials. According to Reuters, due to increased demand in this area, global consumption could rise by an additional 60,000 tons per year by 2030.
Costs of Mining Tin Ore on the Rise
In recent years, tin prices came under pressure due to declining tin ore quality.
As quality declines, expenses related to mining the metal increase due to the necessity of shifting mining methods.
Alphamin, a tin mining company operating the Bisie tin project in the Democratic Republic of the Congo, announced this January that mining methods would shift from caving to cut and fill. The latter method targets more precise areas with a higher percentage of metal available; however, the company’s analysis indicates this will lead to higher costs per ton.
Also according to the International Tin Association, the bulk of global tin ore generally comes from just a handful of countries. Once one of these countries institutes new regulations – such as an export ban or new operational requirements – the supply chain potentially faces significant disruption.
Last year, the bulk of ore supply was sourced from China, Indonesia and Myanmar. China was also the largest destination for tin ore, using an estimated 45% of global supply in 2018.
Ethical Sourcing Issues May Drive Prices Higher
Based on the nature of mining, at times production methods face scrutiny for environmental reasons.
Taking an offensive approach, the International Tin Association (ITA) and the Responsible Business Alliance (RBA) – as part of its Responsible Minerals Initiative (RMI) – recently announced an operational agreement governing the tin value chain that targets the responsible production and sourcing of tin.
As part of this initiative, tin smelter audit criteria and OECD compliance will be scrutinized and improved. Other related initiatives include the new E.U. Minerals Supply Chain Due Diligence Regulation and new requirements coming online from the LME.
Compliance with ethical sourcing could put upward pressure on prices as companies, as new regulations could increase production costs.
Broader Industrial Metal Market Trends in Early 2019
In order to understand the price trend with an individual metal, looking at the performance of the sector can also help determine directionality of the individual metal.
The Thomson Reuters/CoreCommodity Research Bureau (CRB) Index covers a broad basket of commodities that includes some industrial metals with a heavy weighting toward energy (oil).
The CRB suggests some upward price movement compared with the past few months.
When looking at any given metal price, the Invesco DB Base (DBB) Metals Fund trendline could provide clues as to tin’s price trend, given that the DBB tracks pricing of three major metals (aluminum, zinc and copper).
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The DBB rose into 2019, but lately the upward trend flattened out, in line with a longer-term sideways price trend.
As the index struggles to stay above 17, which indicates some underlying price weakness for the index and, by association, other industrial metals (such as tin).
Implications for Industrial Buyers
Based on the structure of mining and production in the tin industry, volatility in pricing tends to be the rule rather than the exception.
Once again, the tin price sits around $20,400 — not surprisingly, since the LME price traded in a band around this level for some time now.
Industrial buyers will want to watch the tin market carefully in the coming weeks to see if the tin price downturn turns around or continues again this year.