Predictions made in early August by Stephen Briggs, metals strategist at BNP Paribas, that tin would move above $20,000 a ton before the end of 2010 are looking both prescient and conservative from our position today. We will remind MetalMiner readers that we did suggest buying forward tin requirements on Aug. 4, based on that analysis.
Tin prices rose this week to a two-year high, less than 10 percent below the metal’s all-time high set in mid-2008, and is showing every chance of continuing to rise further as supply constraints push the market into deficit. A Reuters article explains that tin prices have surged because of a drop in supplies from Indonesia. The country’s exports of refined tin, which account for a third of the global market, dropped 14.5 percent to 43,263 tons in the first half of the year, compared with the same period of 2009. As we covered in an article early last month, ore supplies from Indonesia have been squeezed from two directions. On the one hand, a crackdown on illegal mining in Bangka-Belitug, off Sumatra island, has reduced output and starved many small- to medium-sized smelters of raw material. Second, the long running depletion of the easily mined-on land reserves is forcing the major miners to move off-shore to dredge for alluvial deposits. Indonesia’s government said last month that the nation’s tin output may plunge 20 percent this year, blaming bad weather rather than the above for the shortfall. Production is expected to drop to about 85,000 tons compared with a full-year target of 105,000 tons.
The tin market overall had a shortfall of 9,900 tons between January and July, against a surplus of 9,500 tons in the same period last year, according to the World Bureau of Metal Statistics, quoted by The Financial Times. This has prompted a draw-down of exchange stocks resulting in tin inventories at LME warehouses falling 50 percent since the beginning of the year and are now at the lowest level since May 2009. According to a Macquerie report covered by Bloomberg this month, that puts LME stockpiles at just 5.6 weeks of consumption from 8.2 weeks in late 2009. The report forecasts the deficit at 17,000 tons this year compared with a surplus in 2009.
Meanwhile as global production expands by about 2 percent to 328,500 tons, consumption driven by solder and tin-plate demand may grow by 15 percent to 345,500 tons. The combination of falling supply, falling LME inventories, strong demand and supply concerns from other countries such as the DRC and Minsur SA in Peru will, it is believed, continue to drive the price higher making tin the metal most likely to be first to rise back above its previous all time high of US $25,500 per ton set in 2008 before the credit crisis.