Tin prices set to zoom further as Indonesia plans exports halt

After having surged to record highs with rates topping $40,000 a tonne on Wednesday, tin prices are expected to rule firm over the next few weeks as Indonesia plans to stop the soldering metal’s exports from 2024 to attract investments in downstream industries.

The metal ran up to fresh highs this month on tight supplies, strong demand from sustainability sectors such as solar power, electric vehicles industries and the electronic industry.

Complicating the scenario further are China closing a land port with Myanmar, its biggest supplier on the back of rising Covid pandemic cases and inventories at the London Metal Exchange (LME) and Shanghai Metal Exchange declining to multi-year lows.

95% gain YTD

On Friday, tin ruled in the range of 2,95,000-2,97,000 Chinese yuan ($46,155.76-46,468.680) a tonne down 150 yuan ($23.47). On the LME, tin was quoted at $41,000 for cash and the three-month contract at $39,750-55 a tonne. The metal has gained a little over 95 per cent year-to-date (YTD).

The tin market went into a spin on Wednesday after Indonesia President Joko Widodo, citing the example of his country’s success with nickel, said Jakarta might stop shipments of bauxite next year, followed by copper in 2023 and tin, the year after.

Widodo told during a meeting of bankers that Indonesia would want to export these as semi-finished goods by adding value that could attract more investments into the country.

Dutch multinational financial and investments bank ING’s economic and financial analysis arm, Think, said Widodo’s announcement was part of an ongoing plan by Indonesia to attract investment in the downstream sectors, which would see the export of higher value semi-finished or finished products, rather than raw materials.

Outperformer

Fitch Solutions Country Risk and Industry Research (FSCRIR) said the uptrend in tin prices will continue as Indonesia’s move has roiled the market. It pointed out that the South-East Asian nation has already banned exports of unprocessed tin from 2018, allowing only shipments of the metal with 95 per cent refined content.

A ban on refined tin exports would result in a severe global shortage since Indonesia is the largest shipper besides being the second-largest producer of China. Indonesia makes up a little over 20 per cent of global refined tin production.

Tin market analyst James Willoughby of the International Tin Association (ITA) said tin has outperformed in the metals market despite weaker fundamentals and strong US dollar. Earlier this month, ITA said the average price of tin on the LME was nearly double during the January-September period compared with the same period a year ago.

Prices forecast raised

Though refined tin production during the third quarter this year increased some 8 per cent quarter-on-quarter to 7,205 tonnes, it was still 25 per cent lower than the same period in 2020. The metal output in the first nine months is nearly 50 per cent lower than last year, the association said.

Fitch Solutions said it has raised its forecast for tin prices for this year and next from $28,000 and $26,000, respectively, to $30,500 and $32,500 a tonne, respectively. Tin prices have also gained on the spread of the Covid pandemic in Malaysia, which also contributes significantly to global production.

ITA said operations at the world’s third-largest refined tin producing firm Malaysia Smelting Corporation Berhad (MSC) is returning to normal with the number of Covid cases decreasing in Malaysia. MSC’s return would benefit many and it would result in increasing liquidity of the material, it said.

However, Fitch Solutions said the recovery of the global tin supply from the Covid pandemic has been slow and it has been outpaced by a rapid recovery in demand, particularly since tin is used in electronics for solders in semiconductors.

Spike in electronics demand

The electronics sector saw a massive spike in demand during the pandemic due to the increased sales of medical as well as home equipment and personal devices. The resulting reduction of the global refined tin stockpiles has continued to force prices higher in the YTD, and left the market significantly exposed to price increases during China’s power crunch, FSCRIR said.

During China’s power crunch, the use of tin in soldering photovoltaic cells skyrocketed, it said, adding that there was more room for the metal’s prices to rise further. However, Fitch Solutions said, “We expect the tin market’s fundamentals to ease slightly going into 2022, driven by supply increases, with signs that this is already happening.”

China’s tin production increased 12.5 per cent over September, while the power crisis in the Communist country was also easing. With 80 per cent of MSC’s production returning and the Malaysian firm planning to commission its new and modern Pulau Indah smelting plant early next year, the refined tin production rate will improve.

“The record prices may lead to rationing of the metal, thus affecting its demand, particularly in the electronics sector,” FSCRIR said. “In the long-term too, prices will be heading north,” the ratings agency said.