Cadbury Cans Its Roses, Tin In Epicentre

- November 5th, 2009

Cadbury has abandoned its tin cans for cardboard boxes, in an attempt to go green this Christmas. Could this prove to be the death knell for the tin industry?

By Kishori Krishnan Exclusive To Tin Investing News

Could this be the final nail in the coffin for the tin industry?  With Cadbury, the manufacture of famous chocolate brands Roses and Heroes, deciding to go green, the renowned Christmas treat awaited with much glee in many households, will now pour out of a cardboard box.

As the chocolate manufacture attempts to cut down on the packaging, and hopes to save 200 tons of steel in the process, the decision has left a bitter taste with tin companies.

Though initially the move into cardboard is targetted only at Tesco stores, if consumers agree to the change in packaging, Cadbury may abandon tins altogether.

Ask not for whom the bell tolls?

The change is the biggest since the tins were introduced in 1938. Replacing them with cardboard achieves 45 per cent weight reduction per pack, as also helps the firm cut down on cost. Incidentally, the savings is not being passed on to the consumer.

Jo Grice, head of marketing, giving and seasonal at Cadbury has been quoted as saying: “Many of our customers are dreaming of a green, not white Christmas this year. Introducing an environmental twist will help us to meet shoppers ethical concerns.”

The confectionery giant is hoping to tap into consumer demand for sustainable packaging. But its trial green makeover for the Christmas season could well prove to be the precursor to the dire days ahead for the tin industry.

Any differing takes?

Earthquake in China

Tin got another major knock in China, where a moderate earthquake with a magnitude of 5.5 struck northwest China on Thursday. The epicentre of the quake, was located 164 kilometres northeast of the city of Golmud in Qinghai province.

The earthquake zone, which is home to ethnic Mongolians and Tibetan farmers and herdsmen, is dotted with coal, tin, lead and copper mines. In August, a strong earthquake with a magnitude of 6.2 had struck the very same area.

Dominant position

On the New York Mercantile Exchange’s COMEX division on Thursday, the dominant tin position has resurfaced. With the US Federal Reserve pledging to hold interest rates near zero per cent for an “extended” period, Tin MSN3 ended at $15,000 from $14,790.

Traders noted the dominant position controlling more than 90 per cent of LME stock warrants and cash contracts. That has pushed the premium for cash material over the three-month contract to about $100 a tonne from $75 a tonne on Tuesday.

The tin price on the Kuala Lumpur Tin Market (KLTM) ended higher on Thursday, by US$60 to US$14,850 per tonne in line with the uptrend on the LME.

On the local front, bids amounted to 64 tonnes against offers of 30 tonnes. Turnover slipped to 54 tonnes compared to 53 tonnes yesterday with Japanese, European and local traders continuing to dominate the market.

The price differential between the KLTM and the LME narrowed to a premium of US$135 a tonne from US$285 per tonne previously.

Strong price

The tin price was strong in August, averaging $14,870/tonne, down on the level of close to $15,000/tonne seen in June but up 5.9 per cent on the July average.

Point to be noted: prices are ahead of the fundamentals, and showed signs of easing over the end of August and into September, in line with slackening demand over the summer slowdown period, slipping to $14,050/tonne on September 2.

However, the persistent backwardation in the tin market continues. It is indicative of the market being in a short-term deficit, which is at odds with the latest data showing the market in over-supply.

Recent data from the WBMS shows the market in a 6,300 tonne surplus over the first seven months of the year, as compared with a deficit of 7,600 tonnes over the same period in 2008.

Stocks on the LME increased by 1,970 tonnes over August to end the month on 20,345 tonnes, which largely reflects the weakness in demand more than a pickup in supply, although Chinese production is increasing.

Support line

Analysts maintain a strong supply side support has also come into play. This week, industrial metals have been helped by strong surveys of manufacturing in the United States and China, the world’s largest consumer of industrial metals.

Greater manufacturing activity coupled with increased threats to the supply chain should result in higher consumption levels in 2009, analysts have said.

Result show

Malaysia Smelting Corp Bhd (MSC) said its third-quarter ended September 30 net profit declined 28 per cent to RM 8.77 million from RM 12.27 million a year ago, due to lower tin prices during the period compared with the previous corresponding quarter.

Revenue was RM 611 million against RM 703 million before. However, the group’s “Indonesian operations achieved a positive turnaround in results in the third quarter,” the company told Bursa Malaysia.

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