By Melissa Pistilli-Exclusive to Tin Investing News

Although the short-term outlook for tin and other industrial use metals is understandably bleak at the moment, the long-term projections for the dull base metal show is that it is likely to outshine the majority of its commodity cousins once the current crisis abates.

In their recent report entitled “Tin: A Global Strategic Business Report”, Global Industry Analysts Inc. has said the global tin market would reach 516.9 thousand metric tons by 2012. As more and more become aware of lead’s dangerous toxicity, it is expected that tin demand growth will substantially increase in the coming years as the world transitions from lead to tin-based solders.

Tin is already quickly becoming “the metal of choice” for electronics soldering, which represents the largest and fastest growing market for tin, following the 2006 implementation of European Union regulations that now require the use of lead-free solders.  Tin made up 50 per cent of solders in 2006 and 52 per cent in 2007.

The case for the tin bull was alive and well at the New York Stock Exchange during last week’s Inside Commodities conference. However, it is not just the strong demand fundamentals that have so many people “bullish” on tin. “It’s a matter of supply”, says CPM Group analyst Catherine Virga, who presided on the conference’s base metals panel.

It seems action taken by China and Indonesia – both nations accounted for 70 per cent of global mined tin in 2007 – is beginning to take a toll on tin’s long-term supply outlook.  China’s top three tin producers - Yunnan Tin (world’s biggest tin producer), Yunnan Chengfeng Nonferrous Metals, and Liuzhou China Tin – are all significantly reducing output in reaction to lower prices brought on by the current global downturn.

In Indonesia, the story is the same. Although the government has begun reissuing permits after its 2006 crackdown on tin producers, production has yet to return to previous levels, said Virga.

Yet, like their Chinese counterparts, Indonesian producers have implemented their own production cutbacks. The Indonesian government is also considering placing further caps on tin production for 2009 in an effort to control further price drops.  A smart move given that “with the current gloomy economic picture, only production cutbacks can help base metals gain some support,” say analysts at Angel Commodities.

Declining output from the top two producing nations has shifted the focus of the tin market to other parts of the globe, namely the Democratic Republic of the Congo. “The Congolese government had planned a ban on exports of tin in certain provinces in 2009 as a way to encourage the further refinement of tin in the Congo,” said Virga. “This would have allowed them to benefit from the higher prices for refined exports.”

Unfortunately, the country’s tin-producing provinces are at the centre of a contentious civil war that has escalated out of control despite the efforts of the DRC government and UN Peacekeepers.  The armed conflict has had a “disproportionately large effect on tin prices as international buyers increasingly rely on the relatively small producer,” reports Reuters.

Despite market expectations that demand growth for tin will likely be less than 1per cent, Virga asserts the supply side will remain in deficit as it has been since 2006.  How will this play out in terms of tin price? “No large surge in price is expected anytime soon because of the economy,” Virga points out. However, for the long-term investor the supply/demand outlook does present an interesting opportunity.

Currently, Tin has “an extremely rare fundamentals position: dwindling supply, steady-state demand and an extremely suppressed price,” notes Hardassetsinvesting.com. These fundamentals place tin in a favorable position for a price hike once the global economy starts to recover.

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