Tin market fundamentals remain in place
Fundamentals for the metal that jumped 60% in 2010 remain strong but some are not convinced we will see another record year
Author: Geoff Candy
Posted: Tuesday , 18 Jan 2011
GRONINGEN -
mineweb.com
A 60% price surge in 2010 has put tin on the radar of many traders looking for the next big thing in the commodities space.
And, while there are some that maintain that the price of the metal could continue that surge in the next few years, there are just as many who maintain that the price may hold steady at current levels in the medium term.
The price of tin took off in 2010 as demand for the metal, used in electronics and packaging, recovered strongly after sinking fast in the wake of the global financial crisis.
Added to this uptick in demand was an unusually long rainy season in the world's top tin miner, Indonesia that helped push the supply demand balance into deficit by some 20 000 tonnes.
According to data from the country's trade ministry, Refined tin exports from Indonesia dropped 6.9% to 92,487 tonnes for the full year 2010, compared to 99,287 tonnes in 2009.
According to Peter Kettle, Manager, Statistics & Market Studies at the International Tin Research Institute, demand for the metal in 2011 is expected to remain at around the 365,000 tonne level and once again experience a shortfall of around 20 000 tonnes.
"Since October prices have been stuck in a range of $25 to $27,000 per tonne. It is difficult to know how much of this deficit has already been priced in as the LME market is a futures market but, a spike in prices is possible
That is not to say, however, that in the longer term the metal is likely to perform well. According to Kettle, the big issue for the market is that there is very little in the pipeline by way of confirmed large-scale startups.
"There are one or two new projects that are expected to come on stream in 2012 but, many will only really get going by in 2013."
The question then becomes what can one expect from current production and what is likely in the way of demand.
According to Reuters, Analysts expect supply problem from Indonesia to continue which is likely to support prices.
But, as Credit Agricole analyst Robin Bhar explained, "For this year, we're more likely to see output and maybe exports declining a bit more. It may well stabilize this year, but I don't see a strong rebound either because of the continuing clampdown by the government."
Indonesia expects to produce 90,000 tonnes of refined tin this year if prices stay high enough to encourage mining, a senior official said in end December.
As for demand, that comes down once again, to the Chinese, who these days account for around 40% of global tin usage.
According to Kettle, demand in Asia is back up to record levels with the rest of the world a bit below their peaks.
Asked what potential hurdles lie in wait for prices, Kettle says, historically, there have been times when the market has seen a sudden surge in production from the artisanal miners that make up much of the supply but, ITRI doesn't see such an event in the near future.
"Clearly the macro economic situation is one to watch out for," he adds, "as there is still uncertainty about the nature of economic recovery but, all in all the fundamentals for the market remain good". |
