Tin Outlook 2017: Production Concerns Rise

Tin was the second best-performing metal this year, just behind zinc. Since hitting a seven-year low at the beginning of the year, it gained over 50 percent by November.
Supply chain concerns over Myanmar mines combined with falling inventories have supported the surge in prices that are currently above $21,000 a metric tonne after reaching their lowest point of $13,085.
Here’s a review of what happened in the last twelve months and what is ahead in 2017 for the tin market.

Supply and Demand:

Looking back at last year, Roskill noted that the “tin market had been in a deficit for six of the last ten years with gaps between production and consumption generally having been limited to around 4 percent of the total market.”
Peter Kettle, International Tin Research Institute’s Markets Manager, said: “Looking further ahead we see the possibility of a new growth spurt in tin use, most probably driven by existing and new applications linked to energy conservation and storage.
“However this needs to be matched by investment in sustainable new supply sources which is unlikely to be forthcoming at current price levels.”
Production declined significantly in Indonesia, that has years of underinvestment in new mine capacity, as well as in Peru in China, and despite a surge in Myanmar output, concerns over its sustainability have stressed supply.
In the first nine months of the year, China, the largest producer and consumer of tin, imported 345,884 tonnes of ore and concentrates from Myanmar, up 94 percent from the same period last year.
In addition, ITRI’ annual survey showed that tin use is forecast to be slightly stronger in 2016, “Generally companies appear a little more optimistic about sales in 2016 than last year. Allowing for a recent strong recovery in the China solder market it looks like global refined tin demand could increase by a little over 1 percent this year,” Kettle said.

Production Concerns

Tin is one of the “conflict” or “blood” metals which include tungsten, coltan (tantalum) and gold and large electronic companies now want a certifiable source of materials used in their products to avoid using these metals.
To stir things up in tin’s supply chain, Reuters revealed in December that more than 500 companies, including leading brands such as smartphone giant Apple and luxury jeweler Tiffany & Co., listed among their suppliers Chinese-controlled firms that indirectly buy ore from the Man Maw mine in Myanmar, currently controlled by an insurgent group.
Following this report the ITRI said: “The region accounts for over 95 percent of Myanmar production. We do not expect that a Reuters report today linking Wa tin production to US sanctions will have any significant impact on production or trade in tin in the immediate future.”
MetalMiner’s Stuart Burns said that Tin is relatively well distributed as the five largest producing countries are China 35 percent, Russia 12 percent, Australia 8 percent, Indonesia 7 percent and Brazil 6 percent, according to Platts.
“These mines are not in unstable or war-torn regimes. Some mines in places such as Myanmar and the Democratic Republic of the Congo are less savory, sure, but as a percentage of the whole they are not mission critical to global ore supply,” he added.

Prices: Analysts Optimistic

After falling to the lowest level since 2009 to $13,085 a metric ton in January, tin is currently trading at around $21,100 per mt. The metal, used in electronic solders, climbed as inventories tracked by the London Metal Exchange continued to fall, hitting the lowest in almost eight years.
Predictions remain positive for tin prices, as FocusEconomics said earlier in the year: “Prices remain at relatively-high levels, making tin one of the best-performing base metals this year.”
Falling London Metal Exchange and Shanghai Futures Exchange inventories are signalling that real or apparent demand remains strong, with a BMI Research forecasting a supply shortfall to 9,400 mt in 2020.
“This is mainly due to higher average tin consumption than production, as a result of depleting ore reserves,” the research group said.
Tin prices could see some increased movement early next year Economic Calendar reported, supported by a slight deficit of 28.8 kt during the first ten months of the year with global demand for the metal increasing by 3.90 percent to 319.0 kt year-over-year.
Analysts at Commerzbank AG said: “It was above all the supply side that has helped drive up the tin price in recent months. The reduction of tin stocks on the LME, that has been observed for months now, also points to solid demand for tin.”

Investor Takeaway

It seems that tin could continue to see a surge in prices next year, as long as supply constraints and inventories continue to fall. Investors should keep an eye on how mine production develops in the next months as well as what new uses for the metal the new year might bring.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.