Tin companies cut back production
biz.yahoo.com
June 7, 2001
As with many metals, China has more tin than any other country. National production accounts for roughly 45% of tin output worldwide, according to the State Bureau for Non-ferrous Metals Industry (SBNMI), a bureau under the
State Economic and Trade Commission (SETC) with responsibility for mining and metals in China.
The country has about 15 smelters, each with annual production capacity of over 5,000 tonnes. China's smelted tin amounted to 110,000 tonnes last year, up from 88,000 tonnes in 1999 and 79,000 tonnes in 1998. Most smelters are
located in the southwestern provinces of Guangxi and Yunnan - - which together account for 90% of national tin output. The largest firm, state-owned Yunnan Tin, produced 25,000 tonnes in 2000.
Yet half of China's tin reserves remain unexploited. Why? One problem is that Chinese ore is low-grade in comparison with deposits in countries such as Brazil -- the world's largest producer of high-quality tin. In addition, China's
processing capacity is inadequate, forcing it to export much of its mined tin while importing tinplate, a steel product with a tin coating as thin as one micrometre, and which is used to manufacture many commercial tin products such as
food containers.
Most importantly, supply is easily matching demand, depressing international tin prices. A slowdown in the global electronics sector has weakened demand for solder products, which are used to make electrical connections and
account for nearly one-third of total tin consumption. The advent of new technologies, such as pipe fitters, eliminate the need for solder. The tin industry has also been affected by static demand for tinplate as manufacturers use
ever-thinner tinplating or switch to plastics.
China is itself importing increasing quantities of tinplate: according to the General Administration of Customs, the country imported some 400,000 tonnes in 2000, almost double that of 1999. The country's eight tinplate manufacturers
-- with a combined annual production capacity of 1.4m tonnes -- are furious. They accuse foreign companies of dumping, pushing prices down to US$467 per tonne -- significantly cheaper than the US$634 per- tonne average price
for China's locally-produced tinplate. An association representing the manufacturers is considering requesting the Chinese government to take restrictive measures.
The result of all this has been falling tin exports to China's main markets, the US, Japan and European countries. In 2000, the country shipped over 60,000 tonnes to the West, up 15% over 1999. But exports from January to April this
year totalled 20,980 tonnes -- a more than 8% decrease from the same period in 2000 -- and the outlook for the rest of the year is not positive. There is speculation that the SBNMI, which trimmed export quotas to 40,000 tonnes for
2001, may reduce them further.
Global tin prices have been sliding all year, reaching a seven-year low last month. Tin traded on the London Metal Exchange fell to US$4,855 per tonne on May 25th. Current prices are roughly US$400 lower than actual production costs in China -- estimated at US$5,300 per tonne.
On May 26th, Yunnan Tin, which exports up to 9,000 tonnes a year, officially halted output for at least a month. China's second largest producer, Liuzhou Huazi, may follow suit.
China's tin companies hope that the suspension in production will invigorate the global market, but this is unlikely to happen. One reason is that the cut in output may not lead to a fall in exports. While appearing to be responding to
world prices, China's tin producers may actually be taking this opportunity to reduce the amount of the metal in stock -- meaning that exports would in fact remain at the same level.
The lack of clarity is exacerbated by unreliable export data. A significant proportion of Chinese tin comes from illegal mainland mines that may continue to smuggle it abroad via Hong Kong even when prices drop.
International tin prices will only rise if demand increases sharply and/or Chinese exports are lowered. The former is highly unlikely. The latter depends on how long China's tin industry is prepared to wait before resuming full production.
With the country's tin industry now running at around half-capacity and tens of thousands of state workers temporarily laid off, this might not be very long.
Incoming
China's tin trade, in tonnes
Apr Jan-Apr Jan-Apr
Exports 2001 2001 change y-o-y
Refined tin 4,823 20,980 -8.2%
Tin alloy 999 4,686 -2.8%
Imports
Refined tin 122 639 73%
Tin alloy 247 1,059 -0.6%
Tin concentrate 256 1,346 132.6%
SOURCE: Reuters
SOURCE: Business China |
