Agoracom Blog

Tin price bulls coming out of hibernation

Posted by AGORACOM-JC at 11:29 AM on Tuesday, June 30th, 2015

 

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  • Shrinking tin stocks, dwindling supplies from Myanmar and new Indonesian rules to curb exports are at last creating conditions for bulls who for some time have expected to see higher prices. 

A labourer takes down tin boxes inside a tin container recycling factory in a slum area in Mumbai January 12, 2015. REUTERS/Danish Siddiqui

A labourer takes down tin boxes inside a tin container recycling factory in a slum area in Mumbai January 12, 2015.
Reuters/Danish Siddiqui

LONDON Shrinking tin stocks, dwindling supplies from Myanmar and new Indonesian rules to curb exports are at last creating conditions for bulls who for some time have expected to see higher prices.

But the optimism is tinged with caution as much depends on whether top exporter Indonesia can limit its shipments abroad, something it has failed to do in recent months.

That’s one reason why benchmark tin prices on the London Metal Exchange (LME), at around $15,000 a tonne, are down about 25 percent since early January this year.

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Stocks of tin at 6,810 tonnes in LME-approved warehouses are about half the levels seen in December, the lowest in more than six years and only a fraction of global consumption estimated at 350,000 tonnes this year.

“There is a clear trend toward a depletion of stocks,” said Nicholas Snowdon, metals analyst at Standard Chartered.

“Indonesian exports will be increasingly constrained in the second half of the year. Chinese refined production has become more constrained with less Myanmar concentrate and altogether that points to a tightening trend in the market.”

Stronger growth in top consumer China in the second half of this year and the feed-through into demand for semiconductors and tin are also expected to be a plus for prices.

Solder used in electronics is the most important consumer of tin, accounting for about half of global use of the metal.

To halt illegal exports, Indonesian producers from Aug. 1 will need to prove that their tin comes from government-certified mines before it can be shipped.

One factor that has weighed on global prices is a surprising surge in supply as China’s imports of tin ore from Myanmar spiked, with shipments up over 80 percent so far this year.

But May imports at 21,456 tonnes are down 35 percent from April, which suggests the peak may already have been seen. Additionally, the concentrate from Myanmar is said to contain little tin.

“Some of it can be as low as 10 percent, most internationally traded concentrate has 55 to 75 percent tin,” said Peter Kettle, manager of markets at industry group ITRI.

“To some extent, people (in Indonesia) are exporting while they can … volumes will probably fall after August 1 when there will be more scrutiny of export licenses.”

However, there are doubts the new rules will be applied rigorously, and if they are, traders expect metal to be smuggled out of the country.

The country’s tin smelters in March agreed to limit monthly exports at 4,500 tonnes, which was subsequently lowered to 4,000 tonnes. But exports in April, May and June exceeded that number.

“The market needs to see exports much lower before it believes the curbs will work,” said Stephen Briggs, metals analyst at BNP Paribas. “The bullish side is low stocks.”

(Editing by Veronica Brown and Dale Hudson)

Source: http://www.reuters.com/article/2015/06/29/us-tin-supply-prices-idUSKCN0P902C20150629

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