Tin prices climbed to a seven-year high after a manufacturing-related buying frenzy that depleted physical stocks of the commodity.
Dark gray metal, commonly associated with cans, has become a key material for the global electronics industry. It is used to make solder – the substance that binds circuit boards and wiring. The shift to working from home has accelerated demand for computers and other electronics, while China has also stored the metal to meet its goal of self-sufficiency in semiconductors, traders say.
This has created a supply crisis for a global market that produces 360,000 tonnes per year. The price of tin for delivery in three months on the LME – the smallest by volume of the six major markets offered on the London Metal Exchange – rose more than 70% from its 2020 low to nearly $ 23,400 per tonne.
“The technology usually works against commodities, but in this case, it works for them,” said Maritz Smith, managing director of Alphamin, which produces about 3% of the world’s tin from its Mpama mine. in the Democratic Republic of the Congo.
Other favorable winds have been the growth of electric vehicles and an increase in residential construction in the United States, where tin is used in chemical stabilizers added to PVC pipes and coatings.
On the supply side, production was hit during the pandemic, with some smelters and mines having to close due to lockdown restrictions. Indonesia’s PT Timah saw production drop 40% to 45,700 tonnes in 2020, according to the International Tin Association. CRU, a consultancy firm, estimates supply was 8,000 tonnes below demand last year – a third consecutive year of shortages.
In recent months, a shortage of empty shipping containers also disrupted the flow of refined tin. As a result, buyers, especially in the United States, rushed to buy metal for spot, or the spot market, to meet their consumer needs, offering huge bonuses to guarantee immediate deliveries.
This was reflected in the price of cash metal, which soared last week to a record premium of $ 1,850 per tonne over the three-month benchmark price, before falling back to $ 1,695.
LME stocks were also emptied of metal, hitting a near record high of just 775 tonnes last week before adding tin on Monday. With 230 tonnes already reserved for delivery, the amount of physical metal in the LME system amounts to 1,100 tonnes, or less than two days of global consumption. A year ago, LME stocks stood at 7,500 tonnes.
OTC stocks are also considered to be near critical levels.
“All the big tin traders are sold out for the first quarter of the year and some of the smaller ones for the whole year,” said James Willoughby, market analyst at the International Tin Association.
Considering the time it takes to get a permit and dig a new mine, Alphamin’s Smith says the short-term supply shortfall can only come from expanding or taking over existing mines. A price of $ 25,000 per tonne is necessary for this to be economical, he believes.
“The world is not producing enough tin,” added Richard Williams, managing director of Cornish Metals, a tin and copper miner expected to be listed on the London Stock Exchange, Aim. “The pipeline of new projects is very thin.”