Shortages, shipping and stocks feed bullish tin narrative
Rapidly rising tin demand from electronics firms, together with supply and shipping disruptions and historically low inventories, are in the near term likely to buttress prices of the soldering metal that have shot up to nine-year highs.
Tin prices on the London Metal Exchange are close to $25,550 a tonne, the highest since February 2012, after a gain of 24% so far this year.
Consumption of tin, also used in the manufacture of chemicals and lead-acid batteries and to coat steel cans to prevent corrosion, outpaced supply last year.
James Willoughby, analyst at the International Tin Association, estimates supplies dropped 8% to 327,200 tonnes last year, leaving a deficit of 15,000 tonnes.
“We understand producers sold stocks to the tune of 10,000 tonnes, leaving the market with a real deficit of 5,000 tonnes,” he said.
“In the short term, high prices are likely to be sustained. We are seeing extremely high demand and there are still supply issues in the market. We could see a deficit of 6,000 tonnes this year.”
Shipping issues are delaying deliveries and some consumers are paying more to guarantee delivery.
The problem is particularly acute in the United States where physical premiums paid above the three-month LME price have climbed to $1,000 a tonne, double the levels seen in December.
Tight supply last year was largely caused by falling output at major producers such as Indonesia’s PT Timah estimated to have produced less than 50,000 tonnes last year compared with more than 76,000 tonnes in 2019.
“Some of these companies are still operating at reduced capacity,” said Roskill analyst Adam Slade, adding that he expects a deficit of 10,000-15,000 tonnes this year compared with a shortfall of 20,000-25,000 last year.
Shortages meant draws on inventories in LME registered warehouses, which fell below 800 tonnes towards the record lows hit in May 2019.
Stocks have climbed in recent days due to the attraction of a hefty premium or backwardation for the cash over the three-month tin contract, which surged to an all-time above $5,000 on Monday.
But they are still low and the premium is still above $2,000 a tonne.
Source: Reuters (Reporting by Pratima Desai; editing by Barbara Lewis)