Tin’s Turn Around: From Deficit to Surplus

By Michelle Smith – Exclusive to Tin Investing News

The tin market throughout 2011 was expected to mirror that of 2010, complete with supply deficits and high prices. Relief was not expected until late 2012 or 2013 when new mining projects were supposed to move into production. But, it appears that the market correction may have come early.

Hints of a replay

During the first few months of this year, the tin market was reminiscent of the year past. 2010 concluded with a tin deficit that analysts calculate was between 22,000 – 25,000 tons.

Peter Kettle, Manager of Statistics and Market Studies, at the International Tin Research Institute (ITRI) predicted that 2011 could end with a supply shortfall of 20,000 tons. Tin demand was expected to increase and Indonesia, a major supplier, announced that the world should expect further output reductions from its suppliers, lending foundation to predictions such as Kettle’s.

Consumers demanding more metal than was available in 2010 drove prices up 59 percent. This year looked to be much on the same course. In February, tin amazed observers when prices went up to $32,799 per ton. In April, there was greater awe when tin prices soared even higher to $33,600 per ton.

The reality of  2011

But the story is not playing out exactly the same. Some manufacturers, discouraged by the metal’s cost, took a proactive stance and began using substitute materials, counteracting the foretold deficit.

Furthermore, the surges in demand that were expected did not materialize. Following the natural disasters in Japan, that nation’s tin consumption was expected to fall… and it did. During the first four months of this year, Japanese imports of tin were down by 7 percent.

In a market that was supposed to be faced with inadequate supplies, it was also expected that growing consumption in other countries would fill in the gap.

China used nearly 147,000 tons of tin in 2010. A 5 percent increase was predicted for this year, but instead there have just been disappointing figures. From January through May, China imported almost 58 percent less refined tin and alloys than during the same period last year.

To aggravate matters, US imports were also down, and not slightly, but rather by a whopping 20 percent.

The response from investors, who are also plagued with concerns over European debt, has been massive sell offs of tin. Not only have prices gone south, the amount of the metal held in exchange traded products (ETPs) has also dropped. According to ITRI, at this time last week, there were only 165 tons of tin tied up in ETPs. A drastic reduction from the 405 tons that were recorded from February to mid May.

This month tin hit a year to date low of $25,695 ton and has continued sliding. Prices for the metal on the Kuala Lumpur Tin Market (KLTM) are currently at $25,000 per ton and the London Metals Exchange (LME) is standing a bit higher at $25,380.

Though prices have slid, which could have sparked a buying frenzy and deepened supply problems, the foretold deficit appears to have evaporated instead. The World Bureau of Metal Statistics reported that after the first four months of this year, there was 7700 ton surplAus.

Today in Kuala Lumpur, there were reportedly bids for only 73 tons of tin though 85 tons were being offered.