Tin Surges to 22-month High on Supply Shortages

Three-month tin prices on LME hit a new high since December 2014 at $20,500 per ton

Basic metals have had a bull run in the second half of 2016 as demand has been far outstripping supply. The three-month tin prices on the London Metal Exchange (LME) hit a new high since December 2014 at $20,500 per ton on October 26th, 2016, as reported by Reuters. Tin prices hit their highest point in nearly two years following a shortage of stocks on the LME, which is accelerating tin’s tightening fundamentals during October 2016. The metal that did not trade in official rings was bid up 0.1% at $20,345.

t1Inventories in LME warehouses edged down 5 tons to 2,930 tons, the lowest since June 2004, with two large holdings of cash contracts and warrants. Tin’s scarcity on LME markets has pushed up the premium for the cash contract over the three-month equivalent to more than $200 a ton this week, its highest since early September 2016. When cancelled warrants are excluded, there are just 1,130 tons available, the lowest since July 1989.

Unlike almost all of its peers, the demand for tin has been far exceeding its supply, causing some analysts to predict massive gains for producers of this non-ferrous metal. More than half of all demand for tin is accounted for by the solder that is used to assemble electronics devices such as smartphones and televisions, according to Fastmarkets, a metal research group.

Analysts see the biggest impact on tin prices coming from the supply side. Tin has hit its highest price since December 2014 after inventories dwindled following a decline in shipments from leading tin exporter Indonesia. Indonesia is the world’s largest tin exporter, accounting for up to 35% of the global trade. Moreover, Myanmar, a recent entrant into the tin market, is faced with new regulations that ban exports of all but refined products from legal mines. Faced with ethnic conflicts, output from Myanmar’s main tin mines is declining due to falling ore grades, adding to the global shortage on the supply side. The recent fall in tin prices has also hindered investments in current and prospective tin mines.

On the other hand, the economic slowdown in China, the biggest importer of tin, continues to present some challenges for non-ferrous metal prices. Although this week’s devaluation of the yuan will make tin more expensive for Chinese importers, electronics manufacturers are likely to be well-hedged and able to absorb price rises.

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Copper strips gains on weaker dollar

Benchmark copper closed up 0.1% at $4,740 a ton, following a 2.1% advance in the previous session, on talks of a further fiscal stimulus by China, the world’s biggest producer and consumer of refined copper. Copper prices hit a two-week high at $4,754 in earlier trade. China is expected to increase its copper imports in the coming months as a weaker yuan is expected to fuel arbitrage opportunities. Also, China is witnessing a huge demand for copper from its booming property market. This development could lift demand for most basic metals, including copper.

t3Copper prices also inched down due to a weaker dollar; a stronger dollar makes dollar-denominated commodities like copper more expensive for non-U.S. entities.

Meanwhile, Chile-based mining conglomerate Antofagasta PLC predicted that its full-year copper output would be at the lower end of the original guidance range of 710,000 to 740,000 tons. As a result, output in 2017 is expected to drop to between 685,000 and 720,000 tons. On the other hand, copper prices are predicted to remain subdued in the coming months, after Bank of America-Merrill Lynch expects copper to continue to average below the $5,000 per ton marker in 2017 at $4,975 per ton, as vast Chinese inventories and rising domestic production could hamper imports.

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