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Tin’s turnaround

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Last year proved to be very volatile for the international tin market with prices declining through the final quarter. Metal Bulletin Research reported in December that “tin has spent most of this year underperforming its base metal peers, as the market worries about weak demand, a rebound in Indonesian output, surging SHFE stocks and expectations of higher exports from China.” 

Tin prices in 2017 ranged from below $19,000 (LME Daily Official $ per tonne) up to a peak of $21,450 in early October. By mid-December the metal had reached its lowest point of the year, at $18,700, before going on to stage a dramatic recovery at the beginning of this year, breaching $22,000 at the end of January 2018.

Reporting on the rally, analysts from Metal Bulletin Research (MBR) said: “The World Bureau of Metal Statistics shows the refined tin market was in a deficit of 1,312 tonnes in December 2017, bringing the January-December 2017 deficit to 17,681 tonnes. The global tin market has been in a structural deficit since 2013, which is conducive to stronger tin pricing.”

But the MBR analysts are cautious about the stability of the price increase: “The January rally was exaggerated by the superficial supply tightness caused by the (temporary) halt in Indonesian production and overly-negative speculative positioning at the end of last year.”

Declining supply
In February 2018, the International Tin Association (ITA) reported that due to a decline in the tin grades produced at Minsur’s San Rafael mine in Peru, the producer had reduced refined tin production in 2017 by 8% to 18,033 tonnes. This source of tightening in supply could contribute to the global deficit and be one of the drivers of higher prices.

Tom Mulqueen, manager, Markets, International Tin Association Ltd, notes that “Minsur has provided production guidance of 16,500 tonnes to 17,500 tonnes of refined tin for 2018. This reflects the continuing long-term decline of mine output due to falling tin grades at the company’s San Rafael mine in Peru – the country’s only tin mine.”

Mulqueen adds that the ITA also expects a small decrease in Indonesian mine output to reflect long-term increasing cost and resource pressures. “We expect stricter government regulation of Indonesia’s tin industry and long-term production pressures such as grade decline and resource depletion to impact tin production and shipments this year,” he says.

The view of MBR analysts is: “While Indonesian smelters were unable to export tin in January due to red-tape around their renewal of export quotas and licenses, shipments have been delayed further since the start of the month [February] due to bad weather.”

These declines may yet be balanced out, given the news that PT Timah, the second largest producer of refined tin in the world, has targeted an increase of tin-in-concentrate output up to 35,500 tonnes. Should PT Timah be able to increase its output in 2018, it will follow on from an increase of tin-in-concentrate production from mining operations in 2017 of 29%, which saw the company report 31,178 tonnes. The Indonesian miner also reported an increase in refined tin production of 27% year-on-year to 30,249 tonnes.

Myanmar slowdown
Some of PT Timah’s planned increase in production could result from the signing, in mid-December 2017, of a joint venture agreement with Topwide Ventures Limited in Nigeria. The joint venture will optimize a mining concession area of 16,000 hectares and is targeted at an early stage to have a production capacity of up to 5,000 tonnes of ingots per year.

However, perhaps the most unpredictable influencer over global tin production in recent years – Myanmar – is predicted to see a decline in output. Traditionally it has exported the majority of mined tin production to its neighbor China, but Mulqueen suggests that “declining ore stocks and mine production are expected to result in a significant drop in shipments to China this year.” This prediction is based upon there being no new discoveries of tin deposits in Myanmar. Mulqueen also notes that forecasting output from Myanmar has historically proven difficult and continues to be so.

Predictions are influenced by the knowledge that exports of tin from Myanmar last year were mainly from stockpiled material that was available thanks to new developments in processing technology, rather than freshly mined material.

The Mineral Commodity Summaries published in January 2018 by the US Geological Survey (USGS) stated: “China’s imports of tin concentrate from Burma [Myanmar] had reportedly increased, despite a decline in gross weight, as a result of improved processing equipment in the Man Maw mining area. In 2017, the average tin content of concentrate imported from Burma was estimated to be around 23%, compared with the 2016 average tin content of 13%.”

The significance of the relationship between China and Myanmar can be seen in Chinese customs statistics that report total tin ore and concentrates of 44,798 tonnes in January with 44,298 tonnes from Myanmar. Metal Bulletin reported that the estimated tin content of shipments from Myanmar in January was 11,100 tonnes.

USGS figures show mined tin production from Myanmar in 2016 was 54,000 tonnes, making it the second largest producer of tin behind China (92,000 tonnes). The estimated figure for 2017 is 50,000 tonnes, which places it joint second with Indonesia, with China once again being the dominant producer with an estimated mined tin production of 100,000 tonnes.

“We expect shipments of tin from Myanmar to China, specifically from [the northern state of] Wa, will most likely decline in 2018,” says Mulqueen, “But we must stress that based on the experience of surprise increases in shipments in recent years, we aren’t ruling anything out.”
With the potential of reduced output from Myanmar, Mulqueen believes that mine production of tin in China will increase, as shown in the USGS figures, as shipments from its neighbor decline. “Reopening of closed mines in Yunnan and new mine capacity in the Inner Mongolia region of China is expected to drive this increase,” he says.

Market outlook
Given that global mined tin supply is estimated to be reduced this year, how will these changes affect the market? Mulqueen believes that it will cause prices to continue to rise, albeit at a steady rate. “We expect average prices will rise slightly this year on the back of the weaker dollar and more bullish investor sentiment for commodities. Despite a projected market deficit, there is excess stock in China so we see the overall fundamentals as quite balanced for 2018,” he says.

Even with prices potentially rising Mulqueen says that the ITA still expects there to be a strong demand for tin. “Tin use saw robust growth of some 3% last year based on provisional estimates, partially as a result of weaker consumption in early 2016. We think similar growth of 2-3% is possible this year based on the stronger outlook for the global economy.”

Mulqueen’s outlook on demand through 2018 is echoed by MBR’s analysts, who said: “Although supply tightness may ease in the coming months, we expect demand for refined tin to remain healthy, in part thanks to robust global growth dynamics, including China, which consumes about 50% of global tin. We project a 2.5% increase in global tin consumption this year, including an increase of 2.2% in China. Global semiconductor sales – a proxy for solder demand for tin (50% of total refined tin consumption) should continue to contribute positively to global tin demand after they rose to their highest ever in 2017, totaling $412.2 billion, a jump of 22% from 2016, according to World Semiconductor Trade Statistics [a non-profit mutual benefit corporation].”

By: Duncan Moore

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