Tin weakness temporary, to hit fresh highs - Commodity Online

By Gautam Koderi
Tin is probably the least popular of the base metals bourse at LME. But that does not cloud the fact that the metal was the best performer among base metals during the year 2010, compounding 54 percent to its worth during the time.

The weakness in the metal witnessed recently is likely to be a temporary phenomenon, especially with the inception of ETF’s of base metals. With Rising investment demand and the conspicuous fundamental backing the metal possess, we cannot imagine but prices to move up further on renewed buying interest.

The fundamental backdrop of the metal is much more pronounced unlike other metals, in which investment interest seems to have a considerable bearing on prices.

Hostile weather conditions are mainly to blame for the deficits in the markets. PT Timah, the largest tin miner, located in Indonesia had reported its 2010 production at 40413 tonnes, down over 11 percent from 45086 during 2009. The miner estimates production to fall further to between 37000-40000 for 2011.

The production disruptions persisted when demand for tin kept rising. Global demand for tin rose 11.8 percent, of which China accounted for 44 percent, recording a rise of 11 percent during 2010. The increasing need for tin to replace lead for soldering has also exacerbated the demand push, taking prices towards $38200 per tonne at LME as opposed to $10000 per tonne during early 2009.

The mining ban in the Republic of Congo in effect from September 2010 also contributed to the pinch in the markets. The ban was lifted recently; however, the US ‘Conflict Minerals Act’, which requires mining companies in the region to disclose Securities and Exchange Commission activities involving mining of certain minerals, is likely to keep the situation tight.

Additionally, the crack on illegal mining and mining regulations has curbed the production as well in Indonesia. Fanatical effort from China to reduce the energy consumption has also helped to cap production of the metal. China has already placed production caps for many metals at 8 percent per year for many base metals including tin.

As for the factors that might ease the current market condition, the biggest one would be the Chinese participation, China being the biggest consumer of the mineral. Chinese monetary tightening is definite to affect tin prices in the coming days. Further tightening is likely to be in the country’s policy pipeline, especially with the latest inflation numbers of the country warranting rate hikes.

Tin prices shied away from the highs it scaled earlier during the year following the selloff in commodities prices, Chinese monetary tightening fears and long liquidation. Better weather conditions in also led to a 37.6 percent rise in exports from Indonesia, which brought more metal into the market. However, the deficit is largely expected to be in place in spite of these developments. Analysts continue to advocate prices of tin to rise further towards fresh highs.

Tin, at LME, fell during last week to close at $28548 per tonne, recording a fall of just over 4 percent during the time.