Tin Outlook 2015: Reduced Chinese Supply Could Help Prices

Industrial Metals

A look back at tin’s performance in 2014 and what 2015 holds for the metal. If China ends up supplying less of the metal, it could be a happy new year for the commodity.

The last two years have promised much for the price of tin, and while the metal didn’t live up to the hype expected in 2014, 2015 could prove to be the year that changes.

Tin hit a 15-month low of $19,000 per tonne during October, according to Reuters, and in November it was competing with copper and lead to be the worst performer of the year.

Despite that disappointment, experts throughout the industry are once again rallying behind tin for the coming year.

Supply and demand to push tin prices higher

While recognizing that tin has hit new lows in recent months, Barron’s reported recently that the metal is set for a turnaround in 2015. Analysts predict Indonesia and China will have a harder time mining tin due to declining ore grades; meanwhile, demand is set to increase thanks to the expanded use of tin in new electronic products.

Reductions in Chinese tin production will be especially impactful, as the nation produces more than 100,000 tonnes of the metal each year — more than any other nation.

“Tin, unlike many of the base metals, is not heavily used in construction, and thus the downturn in China’s property sector should not significantly affect demand,” Caroline Bain, an economist for London-based consultancy Capital Economics, said in an interview with Barron’s. “Tin should actually be a beneficiary of any rebalancing of the Chinese economy toward more consumption-driven growth, given that its primary use is in consumer electronics.”

If demand for tin remains high in China — the country accounts for 40 percent of tin use around the globe — while production slows, the metal’s price will certainly be affected.

Barron’s is far from the only news source touting the potential of tin in 2015. As reported by Mail & Guardian, Standard Bank believes tin has the best outlook among the six main industrial metals on the London Metal Exchange due to shortages.

Standard Bank forecasts that tin will enter a period of deficit through 2016, in comparison to copper, aluminum and zinc, which it predicts will be oversupplied.

“Of all the base metals, we are most bullish on the fundamentals of the tin market, due to structural supply shortages and a lack of enough advanced mining projects to remedy the problem in the foreseeable future,” Leon Westgate, an analyst at the bank in London, said in a report.

Capital Economics predicts the tin price will reach $23,000 a tonne by the end of 2015, then hit $24,000 a tonne by late 2016, according to Barron’s.

The fundamental future of tin

Tin is a necessary component throughout the manufacturing sector, especially when it comes to electronics. However, it is also used for packaging, construction, vehicles and more. Its lack of toxicity and resistance to corrosion also make tin a metal valued by manufacturers hoping to sustain an eco-friendly image.

With a projected decrease in tin production forecasted for 2014, the metal was predicted to take off. However, production did not fall by the expected amount, and the tin price fell instead.

The outlook for tin in 2015 is very similar to predictions made the previous year, and the chance that such an occurrence will repeat itself remains.

Two fundamental factors threaten tin’s rise to prominence in the coming year. One is the overestimation of negative conditions in China and Indonesia. Experts believe an absence of new mines, rising production costs and stricter regulations are likely to hinder tin production.

However, this view was shared heading into 2014 and proved to be wrong.

The other factor is that while demand for tin in electronic products is growing, the fact that electronics continue to shrink in size means the overall amount of tin needed may be less than expected.

As devices like smartphones continue to get smaller, current tin imports may be enough to suffice, thereby hampering price growth for the metal.

It will be interesting to see whether 2015 will be the year positive tin predictions finally become a reality.


Related reading: 

Tin Outlook 2014: Analysts Expect Deficit, Higher Prices

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