While the price of tin has made a modest gain since the start of the year, global economic cues may limit the gains in the short term. Indonesia has lifted the export ban increasing supply, while demand is still weak.
Tin prices on the LME continue to fall despite the efforts of Indonesian tin producers to exert control over the global supply balance. Two major exporters, PT Timah and PT Koba, have not yet stopped exports to contracted purchasers.
25 Indonesian tin producers have extended the ban on tin exports until year-end.
As the old adage goes, “The only cure for high prices, is high prices.” The fundamentals of the tin market are showing this statement to be true. The high price in April prompted a sell-off of stocks in China. Now that the price is depressed Indonesia has ban exports hoping for a higher price.
Tin and nickel have been in a battle for the highest priced non-precious metals traded on the LME. Currently the price of tin on the LME is $23,450 per tonne, while nickel is priced at $21,645 per tonne. Comparing the supply and demand fundamentals of the two markets is essential.
The tin market in 2010 was characterized by climbing prices and a supply deficit. Expectations that this year would be a repeat are being washed away as both prices and demand have slipped.
Supply of tin for 2011 may have a 15,000 tonne deficit, driving prices higher still. China recently capped production of tin and other base metals; and Indonesia, the largest exporter of tin, has capped production at 100,000 tonnes and cracked down on illegal mining.
Reduced tin production from Indonesia has had a big effect on prices for the base metal. Fearing that the high prices will encourage a wave of new production, Indonesia has stated that it will limit production to 100,000 tonnes, which could cause a larger supply deficit in 2011, boosting prices even higher.
Tin production Indonesia fell approximately 12 percent short of its 90,000 tonne goal in 2010. The country reported having only been able to produce 78,965 tons of the metal.
Tin has already advanced approximately 40 percent this year, and is the top gainer of the base metals on the LME with second-place nickel trailing by nearly 13 percent.
Thursday, January 12, 2012