Tin prices fell 5% last week on profit taking ahead of Chinese New Year

Tin prices fell more than 5% in the global market last week, slipping from record highs, but the drop is seen as temporary ahead of the Lunar Chinese New Year. Solder metal prices are expected to remain firm this year and over the long term.

“Profit taking ahead of the Chinese holiday (for the Lunar New Year) has seen a weaker tone in recent days,” said James Willoughby, market analyst at the International Tin Association (ITA).

Price up 85% YoY

Tin prices on the London Metal Exchange (LME) closed at $41,684 for the three-month contract. The metal was offered at $42,500 in cash over the weekend.

On the Shanghai Metal Exchange, tin for March delivery ended down at 329,600 yuan ($51,815.75) a ton on January 28. Commodity exchanges and trading establishments are closed in China until February 7 from January 29 in view of the Lunar New Year.

In November last year, research agency Fitch Solutions Country Risk and Industry Research (FSCRIR) raised its average tin price for 2022 to $32,500 from $26,000, as slow supply was exceeded by the recovery in demand.

Tin is up almost 7% year-to-date and around 85% year-over-year.

Bullish Factors

The Covid pandemic has been the main driver of tin prices, as lockdowns to control the spread, particularly in Malaysia and Indonesia, which together account for 30% of global refined tin production, have led to a tightening of supply.

Tin, which finds its use in electronics, semiconductors, personal appliances and solar power equipment primarily as a solder material, has also seen an increase in demand following the rise in sales of medical and household equipment.

Tin began its current bull run in November last year when Indonesia announced plans to ban soldering metal exports as part of its move to attract investment in downstream industries.

Market focus

“The situation in Indonesia remains at the center of the market. Delays in private smelter export licenses have fueled speculation on the LME, pushing the benchmark price to new highs,” Willoughby said.

Traders and consumers were not affected by this, however, as they had anticipated such a situation and stocked up accordingly, he said.

Delays in issuing export licenses to private smelters are due to stringent checks by the Ministry of Energy and Mineral Resources (MEMR) on mines’ annual work plans, the market analyst at the ITA. These were previously verified by local governments, but have now been placed under the MEMR. Annual work plans are a crucial part of export licensing requirements.

The new factory in Malaysia

Fitch Solutions said tin prices were also driven by lower global inventories of refined tin and the market exposed during China’s electricity crisis, particularly when demand for solar panels increased during the crisis.

FSCRIR said tin prices could decline slightly this year given an expected increase in supply. In addition, Malaysia Smelting Corporation Berhad commissioned its new modern smelter in Pulau Indah to replace its aging Butterworth smelter in Penang, which was found to be inefficient.

His view was shared by UOB Kay Hian Research, which said prices may gradually decline in 2022, although they will remain firm in the long term as the structural supply problem may persist.

The new foundry has 50% more capacity at 60,000 tonnes while using 40% less labour. Its electricity consumption will probably be 30% lower than that of the Butterworth plant.

PT Timah’s projects

In addition, PT Timah, the world’s largest producer, is expected to increase its tin production, encouraged by soaring tin prices. Fitch Solutions said the Indonesian giant is expected to significantly reverse its production cuts made in 2020 by this year.

High prices, on the other hand, could affect demand since the user industry could resort to some rationing since it will be difficult to pass on input costs to consumers.

Published on

January 31, 2022