By Kishori Krishnan Exclusive To Tin Investing News Share

Malaysian tin jumped 7.5 per cent to score more than a 4-month high on Monday to US$ 12,080, as soaring London Metal Exchange prices and buoyant demand led by Europe boosted prices, one dealer said. The current price level was unseen since December 12, 2008.

Tin price had peaked at $25,495/t in May 2008, but then slumped by more than 50 per cent in five months, due to the global financial crisis. Prices are volatile but have found support at $11,000/t. The Resource Capital Research (RCR) group anticipates that tin will trade in the $9,000/t-$15,000/t range in 2009, with an average price of US$ 12,750/t.

The price of tin, used in food packaging and soldering of electronic components, has fallen about 56 per cent from an all-time high of $25,500 a tonne hit last May as the global economic crisis hit. Global demand for refined tin was 350,000 t in 2008, a 3.6 per cent decrease from 2007. China consumed 36 per cent of supply in 2007. In 2008, mine production was 333,000 t, up from 320,000 t in 2007. Of this, 72 per cent was mined in China and Indonesia.

“We believe that the mid-term outlook for the tin sector is strong,” says RCR tin analyst  Trent Allen. “For much of 2008, supply problems were predicted for the tin market due to surging demand from China and decreasing alluvial production out of Indonesia. These problems could quickly re-emerge if the current round of global economic stimulus restores reasonable demand for base metals – in fact, they could be exacerbated by lags in reestablishing tin output from existing mines and restarting future projects that have been shelved due to the credit crisis. We think tin will be one of the first metals to recover once markets stabilise.”

Plans curtailed

Indonesia, the world’s second-largest tin producer, has called off a plan to impose limits on tin exports this year following the metal’s price decline on the international market. An official said the proposal had aimed to keep prices above $12,000 a ton by constraining supplies to the international market. It was abandoned because of low demand for the commodity, said Bambang Setiawan, the director general of minerals, coal and geothermal energy at the Energy Ministry. On Sunday, tin was priced at $12,355 per ton on the London Metals Exchange.

The quota system was also proposed so the government could easily keep track of illegal mining of the mineral, which was on the rise when prices were high. Illegal mining and exports of tin from Indonesia were blamed for a sharp plunge in world tin prices in 2002. “The drop in the metal’s price reflected the current slow demand,” Bambang said. “Without a quota limit, the tin producers will have to work together to cut their production and keep the price stable in the market.”

Despite the cancelation of the proposal, state mining firm PT Timah Tbk had already cut production because of the global slowdown. “The current metal price had forced us to cut production from last year,” said Abrun Abubakar, Timah’s corporate secretary. “It made us suffer significant losses too.”

Timah’s tin production dropped to 49,029 tons last year from 58,325 tons in 2007. The company’s revenue rose 6 per cent from Rp 8.542 trillion ($751.7 million) to Rp 9.053 trillion in 2008, due to soaring tin prices in the first nine months of 2008. For this year, revenue is estimated to be down almost 50 per cent, Abrun said.

Indonesia’s tin production was estimated to fall to 80,000 tons this year from the average of 120,000 tons in the last few years. However, with tin prices increasing from their low of $9,730 a ton in December, Trade Ministry data show tin exports rose by 30 per cent to 11,086 metric tons in March from 8,534 tons in February, which brought the total exports from January through March to 25,959 tons, worth $252 million.

But Timah also saw more opportunity to do spot trade as slowing demand has prompted buyers to reduce long term contracts. “Buyers now only seek short-term supply for three months not a full year contract because of slowing demand. We see more opportunity for spot trade as demand is not fixed yet,” Abubakar said.

Company news

A Toronto junior miner is of the belief it has $2.5 billion worth of resources in its two zones in southern New Brunswick. Adex Mining Inc. (TSX.V:ADE) has released the results of a mineral resource estimate of the north zone of Mount Pleasant, 80 kilometres south of Fredericton. The report showed 10.88 million tonnes of tin-indium-zinc based on sample analysis and geologic projections and another 7.6 million tonnes of the resources from projections alone.

Based on “back of envelope calculations,” the company said the partially sample-based resources estimates could be worth about $900 million, and the projected resources could be worth $600 million.

“The results from our drill program has not only significantly increased the size of the resource but it also has upgraded the quality of the resource,” Adex president and chief executive Kabir Ahmed said. A 1997 report had estimated 3.65 million tonnes of resources in the north zone.

However, Adex is holding back on development given the current low metal prices and tight credit markets. Like many others of its ilk, it is waiting for the right moment.

Questions about this article? Leave a comment below or contact our editorial team at editor@resourceinvestingnews.com.