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Feature: Tin maintains record-breaking run as short-term issues add to chronic supply tightness

Highlights

Indonesia export license issues driving speculation

Tin market chronically undersupplied

Demand likely to grow more significantly that supply

After a record-breaking 2021, tin prices have pushed on to fresh record highs this year as short-term issues around supply from Indonesia add momentum to an already chronically undersupplied market, according to analysts.

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Tin -- one of the so-called metals important for future technologies, or MIFTs -- has been on a tear since March 2020 at the start of the coronavirus pandemic, with the price having tripled over the past two years, and up around 11% year to date.

The London Metal Exchange three-month spot tin price was trading at $43,955/mt as of 1406 GMT Feb. 17, easing back slightly from the record high of $44,250/mt reached on Feb. 10.

Tin is heavily used in electronics and has seen its inventories trending lower for more than two decades, according to market analysts. In the long term, demand for tin is expected to benefit from new markets such as electric vehicles and electrical infrastructure, as well as 5G mobile communications and related technologies.

The market is relatively minor in size. In 2021, production of refined tin totaled 378,100 mt, with consumption of the refined metal at 390,900 mt, James Willoughby, a market analyst with the International Tin Association, told S&P Global Platts.

In tin-in-concentrate/metal contained terms, China was the world's top producer in 2021 with 87,500 mt, accounting for 29% of world output, followed by Indonesia with 65,200 mt and 22% of global output, and Myanmar with 38,800 mt, 13% of world production, according to ITA data.

Indonesia export delays

Myanmar has long been experiencing issues with the depletion of its reserves, Commerzbank's commodities analyst Daniel Briesemann said in a research note, but it is Indonesia that is the current focus of the market, with concerns around delays to private smelter export licenses driving speculation on the LME.

"It would seem that speculation is the main price driver at the moment, and that the Indonesian situation is the most likely cause," the ITA's Willoughby told Platts.

"The reason for this assumption is that trade, particularly in the spot market, is reportedly relatively slow. Indicators of physical market tightness (stocks and spreads) show that the tightness has eased in recent weeks," he said.

According to data from the Indonesian Ministry of Trade, the country exported just 1,200 mt of tin in January, 70% less than a year earlier and the lowest monthly figure for over six years, Commerzbank's Briesemann noted.

On the subject of profit-taking since the Chinese holidays at the start of February, there appeared to be some profit-taking in the run-up to the Lunar New Year but none since, Willoughby said.

"Typically speculators will close out their positions before the holidays so that they are not affected by volatility during the non-trading period," ITA's analyst said.

On the subject of supply, Briesemann said the tin market is viewed as being chronically undersupplied, but that the supply shortage was being worsened by ongoing logistical problems. This was echoed by ITA's Willoughby, who said logistics issues continued to be a major concern for consumers.

"Many have increased their stock holdings in order to [guard] against unforeseen issues, and this stocking cycle did increase tightness in the market relative to normal conditions," he said.

Few new projects

Looing ahead, globally there are very few new projects due for commissioning that could provide some respite for the tightness.

"We feel that there are just 11 new projects (and one expansion) that are likely to be commissioned by 2030. Together, these projects could provide some 35,000-plus mt into the concentrate market," Willoughby said.

"However, in the same timescale, we see tin use growth rates doubling from a historical rate of around 1-2% to more like 3-4%. Over the same period, demand is likely to grow more significantly than supply, leading to continued tight markets," the analyst said.

In 2020, some 48% of demand came from soldering, Willoughby said, while last year semiconductor demand was the main driver, growing by 26% and expected to grow by another 9% in 2022 year, ED&F Man Capital Markets analyst Edward Meir said in a research note.

In terms of potential substitution, there are very few alternatives to tin-based solder, and none that are major competitors, Willoughby said.

"Conductive adhesives, for example, are currently used to connect temperature-sensitive components or flexible circuits, but for major uses, issues with low conductivity and joint strength mean that this technology is unlikely to replace traditional solder. Other technologies are similarly niche and have similar issues," ITA's analyst said.

Recycling

As in precious and base metals, recycling plays a key role in supply. Tin recycling is presently around 33% of all tin use, while about 20% of all refined tin comes from recycled sources, Willoughby said.

In terms of end-of-life material, such as for example from old electronics, this type of scrap is more challenging to process, the analyst said.

"An increase in collection rates will increase the baseline of tin available for recovery, but an improvement to scrap sorting and other pre-processing steps will increase the yield, which is perhaps equally as important," Willoughby said.

"As tin is found with other metals, it is rarely the target for recovery -- there are a variety of metals on a circuit board. Tin is one of the less abundant (but one of the more valuable) metals, but is often overshadowed by gold and copper," he said.