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Tin markets react to news that shipments out of top exporter Indonesia fell 27 percent on the year
By Adam Currie — Exclusive to Tin Investing News
Tin prices have displayed a firming trend over the past four weeks, buoyed to a six-month high by news that shipments out of top exporter Indonesia fell 27 percent on the year.
The market’s bullish sentiment is very much the opposite of what analysts had forecast for the first quarter of this year.
The metal’s rise to price levels above $24,000 per tonne is already above recent projections put forward by Ord Minnett Senior Mining Analyst, Luke Smith.
In a note outlining the market, Smith had forecast an average price of $22,613 per tonne for this year.
Smith commented that part of the reason for tin’s resurgence over the past four weeks is that following a volatile period last year, the commodity’s fundamentals are finally looking sound. He stressed that inventories of the metal in London Metal Exchange (LME) warehouses had fallen dramatically, totalling 9,665 tonnes as of January 27, against a 52-week high of 23,425 tonnes.
A restructuring of the tin market in Indonesia has also contributed to movements over the past month.
Indonesian influence
In what many are calling an attempt to gain control over market prices, the Indonesia Commodity & Derivatives Exchange (ICDX) launched physical tin contracts to rival the 130 year old LME benchmark price. The Indonesia Tin Market (INATIN) officially opened its initial physical tin contract transaction on the ICDX on February 1.
Indonesia’s substantial tin reserves of approximately 800,000 tons – equivalent to approximately 15 percent of production at current rates – ensure that it will remain a key player in global tin prices.
In an interview with Reuters, Nick Trevethan, senior commodities strategist at ANZ in Singapore commented: “Tin buyers must be thinking about alternative suppliers rather than risk disruptions, if Indonesia’s smelters again try to force prices higher.”
Seeking alternatives
Analysts suggested that the best-placed alternative suppliers are Peru, Brazil, and Bolivia, where largely untapped reserves range from 400,000 tonnes to 710,000 tonnes, according to US Geological Survey data.
Ideology shifts affected Bolivian markets in January, with President Evo Morales seeking to lure foreign investment back into mining, which had stalled after he nationalized the gas industry. Last month Morales appointed Mario Virreira, who once worked at the Vinto tin smelter, as the country’s Minister of Mines. According to ITRI, tin is currently Bolivia’s third most lucrative mining export, with metal and concentrate sales accounting for up to 15 percent of total foreign earnings.
Prices dipped briefly in February on the back of an announcement by the Indonesian energy ministry that the country will ban exports of some unprocessed metals from 2014, and could revoke export licences of firms that violate the ban. According to Reuters, minerals covered by the ban include copper, gold, silver, nickel, tin, bauxite, and zinc.
The ministry argued that the regulation would improve domestic metal production capacity, boost supplies of refined products, and increase government revenue. The Indonesian Mining Association responded by urging the government to delay the regulation’s implementation.
Bob Kamandanu, the association’s treasurer, claimed that the current regulation was acceptable, telling Reuters: “Minerals like gold and tin need to be processed anyway so the mining companies do not have to make a big overhaul to meet the regulations.”
Company news
Avenue Resources (ASX:AVY) received a vote of confidence in its exploration focus on tin in Brazil, with investors taking up a placement to raise A$2 million. According to the company, the placement will fund exploration activities at its newly-acquired tin projects, which are strategically located in the major tin province of Rondônia, Brazil.
US Steel Corporation (NYSE:X) reported an improvement in market conditions for steel products, including tinplate, at a recent briefing. In a conference call following the company’s year-end earnings release, USS chairman and CEO John Surma stated that nearly every major flat-rolled steel market is showing signs of improvement this year. “Some more than others, but all positives nonetheless,” he added.
In February, Indonesian state-controlled tin miner Timah forecast that its tin production would increase by as much as 6 percent this year due to the operation of the company’s production plant. According to a local media source, the company’s production is forecast to increase by 5,000 to 6,000 tons in 2012, lifting the upper limit of the company’s annual output target to 44,000 tons.
Alphamin Resources Corp. (TSXV:AFM) announced that it had completed a detailed review of all historical data on its Bisie Tin Project in the North Kivu Province of the Democratic Republic of Congo.
The company stated that results show significant tin mineralization in chlorite schist host rock, confirming potential for a mineralized halo surrounding high-grade veins.
The mineralization at Bisie was determined to be unique from other known tin deposits in the world due to its “high grade and presence of rare earth elements up to 0.5%.” Alphamin is currently in negotiations with several contractors and intends to commence drilling during the first quarter of 2012.
Securities Disclosure: I, Adam Currie, have no direct investment interest in any company mentioned in this article.