LONDON, July 7 (Reuters) - Copper may grab the supercycle
headlines but it's the tiny tin market that outperformed all
other base metals in the first half of this year.
London Metal Exchange (LME) tin hit a decade high of
$33,181 per tonne in June and is currently trading around
$31,800, up by 51% on the start of the year. Aluminium, the
second-best year-to-date LME performer is up by 25% and copper
The LME cash tin price continues to command a significant
$1,000-per tonne premium over the anchor three-month price,
reflecting low inventory and chronic time-spread tightness.
Physical tin users are paying even more, up to $2,000 per
tonne in Europe and over $3,000 in the United States, assuming
they can find anyone with spare metal to sell, according to
Shanghai Futures Exchange (ShFE) tin prices have this week
surged to the highest level since the contract was launched in
2015, suggesting that physical tightness is spreading to the
world's largest producer.
Expectations that global production would bounce back from
its pandemic problems in the second half of 2021 are being
The tin supply chain is suffering a metallic version of long
COVID with renewed lockdowns in Indonesia and Malaysia affecting
the world's second and third largest producers respectively.
Malaysia Smelting Corp, which last year produced
22,400 tonnes of refined tin, has declared force majeure after
being forced to close its mining and smelting operations in
The company was already struggling to meet customer
shipments due to furnace problems at its older smelter. It
warned in April it wouldn't return to pre-pandemic output levels
until the end of the year, a time-line that has likely just
Indonesia, the world's largest exporter of tin, has also
been struggling to lift production despite the clear price
incentive to do so. Exports slid 3% year-on-year to 26,900
tonnes in the January-May period, the slowest pace of shipment
Renewed lockdowns across parts of the country suggest no
CHINA TURNS EXPORTER
China has stepped into the rest of the world's supply breach
thanks to an export-friendly arbitrage window between the
London and Shanghai markets.
The country exported 3,045 tonnes of refined tin in May, the
highest monthly outflow since 2007. Cumulative net exports so
far this year have totalled 4,200 tonnes, compared with net
imports of 5,800 tonnes in the same period last year. (https://tmsnrt.rs/3yw3W09)
Exports under the "other articles of tin" trade code have
also surged by 60% year-on-year to 1,800 tonnes.
Some of the refined exports have been heading to Taiwan,
Singapore and Malaysia, which helps explain the recent uptick in
stocks held in LME warehouses in those countries.
But much has been dispersed around the world to meet the
needs of physical users. May's total included shipments to
Romania (80 tonnes), Turkey (59 tonnes), the Netherlands (50
tonnes), Italy (50 tonnes) and Poland (20 tonnes).
China's switch to net exporter, however, appears to have
tightened the domestic market, which is facing its own
long-COVID production issues.
Tin stocks registered with the ShFE have plunged 63% from a
March high of 8,853 tonnes to last Friday's 3,260 tonnes.
ShFE time-spreads have tightened with premiums for nearby
contracts extending along the forward curve through November
Local speculators have noticed what's going on. Market open
interest has built rapidly in tandem with the rally to
life-of-contract highs. (https://tmsnrt.rs/3hkxLuF)
It seems unfortunate timing for Yunnan Tin to take one of
its two smelters down for annual maintenance, a supply
interruption scheduled to last 45 days, according to the
International Tin Association (ITA).
The company's production has already been impacted by
power-rationing due to drought in the hydro-rich province and by
constraints on raw materials supplies.
Yunnan's cluster of tin smelters source much of their tin
concentrates from neighbouring Myanmar, where production and
shipments are being impacted by renewed coronavirus
A shortage of workers at mining and processing sites saw
China's imports of tin concentrates from Myanmar more than halve
in May from April with cumulative flows down 9% in the first
five months of 2021.
A smaller alternative stream of raw materials from Rwanda is
also at risk as businesses are forced to reduce by 50% their
workforces to slow the spread of the coronavirus.
The continued proliferation of supply hits means that
earlier hopes things would normalise over the second half of the
year already look to be wishful thinking.
The ITA is now forecasting a global supply deficit of 10,200
tonnes this year as faltering output fails to match a demand
rebound fed by the home electronics sector.
Indeed, the Association is forecasting sustained deficits in
the years ahead as tin usage gets a double boost from its usage
in green energy transition technologies and the coming internet
Tin is literally hard-wired - via solder - into everything
that uses a circuit-board. The metal is, according to Julian
Kettle, senior vice president of metals at research house Wood
Mackenzie "the forgotten foot soldier of the energy transition".
"Indeed, its use in electronics has the potential to make it
a kingmaker in terms of the energy transition," Kettle wrote in
an April research note.
But only if there is sufficient supply of the metal, a real
threat given the historic lack of investment in what was viewed
as a niche metal until just a few years ago and the current
producer trials and tribulations.
While other metals are buoyed by expectations of future
tightness as the green revolution gathers pace, tin is already
This is a market that is already experiencing scarcity
pricing, a situation that shows no signs of short-term
(Editing by Kirsten Donovan)