By Pratima Desai
LONDON (Reuters) – Reduced tin production because of coronavirus lockdowns is likely to result in supplies falling short of demand and ensure prices for the metal used in electronics will outperform those of other base metals this year.
For metals such as copper, aluminium, zinc, lead and nickel, demand destruction caused by the pandemic is expected to outweigh supply disruptions and leave large surpluses.
Tin vs other metals https://fingfx.thomsonreuters.com/gfx/ce/nmopanazrva/Tin%20vs%20other%20metals.PNG
Benchmark tin on the London Metal Exchange (LME) has risen nearly 20% to about $15,000 a tonne since March 23, when prices touched their lowest since the global financial crisis more than a decade ago at $12,700.
Suspended production in Peru, Brazil and Malaysia, plus output cuts in Indonesia by PT Timah, the world’s second-largest producer, have all contributed to tumbling supplies in recent months.
Indonesia’s tin exports in April were 4,220 tonnes, down more than 40% from the 7,464 tonnes in February.
Adam Slade at consultants Roskill expects global mine supplies to fall 8% year on year to 270,000 tonnes in 2020 and total refined supply, including scrap, to drop to 355,000 tonnes from 378,000 tonnes last year.
“We expect a refined tin market deficit of 5,000 tonnes this year. There is a bottleneck on the feedstock side, the material coming out of mines,” Slade said, adding that availability of so-called revert scrap is also a major worry.
Revert scrap – small amounts of solder that can be reused immediately – is typically generated in manufacturing, where activity is expected to remain subdued this year.
An analyst at a commodity-focused fund estimates the tin market deficit at about 3,000 tonnes.
“The risks are for a higher deficit if there is a second wave of the virus that again curtails production,” the analyst said. “The market is already short; see the inventory draw.”
Tin stocks https://fingfx.thomsonreuters.com/gfx/ce/yzdvxozrjpx/Tin%20stocks.PNG
Tin stocks in warehouses monitored by the Shanghai Futures Exchange have tumbled more than 50% to 3,248 tonnes since the middle of February and are at their lowest since last December.
In LME-registered warehouses, stocks have dropped more than 50% to 3,500 tonnes since early April and are at levels last seen in June 2019.
Tin Spreads https://fingfx.thomsonreuters.com/gfx/ce/qmyvmnegbpr/Tin%20spread.PNG
Worries about supplies on the LME market can be seen in the premium for cash tin over the three-month contract, which last week surged to $175 a tonne from $10 a tonne in April. It was last at $136 a tonne.
Semiconductor sales vs tin prices https://fingfx.thomsonreuters.com/gfx/ce/gjnpwedzqpw/Semiconductor%20sales%20ve%20tin.PNG
However, not all agree on a deficit, with some observers expecting sliding demand to outweigh falling supplies.
James Willoughby, analyst at the International Tin Association, expects a surplus of about 14,000 tonnes this year.
“Smelters will have to produce for cash flow,” Willoughby said. “Demand will remain weak until at least the fourth quarter, possibly until next year.”
Tin is used in a variety of applications, including chemicals and tinplate for cans, though solder for electronics, white goods and the automotive industry accounts for nearly 50% of global demand.
Tin use by sector https://fingfx.thomsonreuters.com/gfx/ce/dgkplgyzzvb/tin%20use%20by%20application.PNG
(Reporting by Pratima Desai; Editing by David Goodman)