Tin prices dropped over five per cent in the global market last week slipping from record highs, but the fall is seen as temporary ahead of the lunar Chinese New Year. The soldering metal’s prices are likely to rule firm this year and in the long run.
“Profit-taking ahead of the Chinese holidays (for the lunar New Year) has seen a weaker tone over the last few days,” said James Willoughby, market analyst with the International Tin Association (ITA).
Prices up 85% y-o-y
Tin prices on London Metal Exchange (LME) closed at $41,684 for the three-month contract. The metal was offered at $42,500 for cash during the weekend.
On the Shanghai Metal Exchange, tin for delivery in March ended lower at 329,600 yuan ($51,815.75) a tonne on January 28. Commodity exchanges and commercial establishments are closed in China until February 7 from January 29 in view of the lunar New Year.
In November last year, research agency Fitch Solutions Country Risk and Industry Research (FSCRIR) raised its 2022 average price for tin to $32,500 from $26,000 as the slow pace of supply was outpaced by the pick up in demand.
Tin has increased by nearly 7 per cent since the beginning of the year and about 85 per cent year-on-year.
Bullish factors
The Covid pandemic has been the main driver of tin prices as the lockdowns to check the spread, particularly in Malaysia and Indonesia which account for a total of 30 per cent of global refined tin production, led to supply tightness.
Tin, which finds its use in electronics, semiconductors, personal devices and solar power equipment mainly as a soldering material, also saw a rise in demand following higher sales of medical and home equipment.
Tin began its current bull run in November last year when Indonesia announced that it plans to ban the exports of the soldering metal as part of its move to attract investments in downstream industries.
Market’s focus
“The situation in Indonesia remains the focus of the market. Delays to private smelter export licenses have driven speculation on the LME, pushing the benchmark price up to new highs,” said Willoughby.
Traders and consumers have, however, not been affected by this as foresaw such a situation and stocked up accordingly, he said.
Delays in providing private smelter export licenses are due to stringent checks carried out by the Ministry of Energy and Mineral Resources (MEMR) on the mines’ annual work plans, the ITA market analyst said. These had previously been checked by local governments, but have now been brought under MEMR. Annual work plans are a crucial part of the requirements for export licenses.
Malaysia’s new plant
Fitch Solutions said tin prices have also been driven up by a drop in global refined tin stocks and the market was left exposed during China’s power crunch, particularly when demand for solar panels increased during the crisis.
FSCRIR said tin prices could ease slightly this year in view of an expected rise in supplies. Besides, Malaysia Smelting Corporation Berhad has commissioned its new and modern Pulau Indah smelting plant replacing its ageing smelter at Butterworth in Penang which has been determined as inefficient.
Its views were shared by UOB Kay Hian Research, which said prices may ease gradually in 2022, though they will be firm in the long-term as the structural supply issue may persist.
The new smelting plant has a 50 per cent higher capacity at 60,000 tonnes while using 40 per cent lower manpower. Its power consumption will likely be 30 per cent lower than the Butterworth plant.
PT Timah’s plans
Besides, PT Timah, the world’s largest producer, is expected to increase its production of tin, encouraged by surging tin prices. Fitch Solutions said the Indonesia giant is expected to reverse its production cuts made in 2020 significantly by this year.
The high prices, on the other hand, could affect demand since the user industry could resort to some rationing since it will be difficult to pass on the input costs to consumers.