LONDON — What will tame the wild tin market?
The smallest of the London Metal Exchange (LME) base metal contracts continues to defy market gravity.
LME three-month tin CMSN3 is trading at US$55,225 per metric ton, close to the all-time high of US$59,040 reached during the frenzied cross-metals rally in January.
To put that into context, the previous record was US$51,000 per ton in March 2022, when metals prices surged in reaction to Russia’s full-scale invasion of Ukraine.
The London tin price is up by 36 per cent since the start of the year. The next best performer is aluminum, which has risen by 23 per cent and is experiencing an unprecedented supply shock after the loss of Gulf production due to the Iran war.
Tin supply, by contrast, is stable right now relative to recent years. LME stocks have been rising. LME time-spreads say there’s no shortage.
So how come the price of the soldering and packaging metal is still trading at such historically elevated levels?
Rebalancing
Tin supply has no direct exposure to the war in the Gulf, unlike aluminum, nickel and copper.
Global mine production is on course to grow by a healthy 8.7 per cent this year, according to the International Tin Association (ITA).
Myanmar’s Man Maw mine is gradually returning to life after a prolonged absence. Production at the Bisie mine in the Democratic Republic of Congo is stable after last year’s brief closure due to encroaching M23 insurgents.
China’s imports of tin concentrates are running above 15,000 tons per month for the first time since 2023.
Refined production is taking time to catch up, with projected global growth of 2.7 per cent this year, according to a presentation at LME Asia Week given by ITA market analyst Huanbo Qin.
Consumption, however, is forecast to fall by 0.7 per cent, reflecting a slowdown in Chinese solar installations, the broader impact of the Iran war on consumer appetite for electronic goods and historically high pricing.
The market’s fundamental landscape is shifting towards supply-demand balance. Progress is clear to see in the form of rising visible exchange inventories. LME stocks are up by 60 per cent since the start of the year at 8,660 tons.
Including LME off-warrant and Shanghai Futures Exchange (ShFE) inventory, global exchange stocks are close to 20,000 tons, compared with 11,000 tons as recently as October.
By comparison with the volatile outright price, LME time-spreads are trading sideways in comfortable contango.
The scarcity meme
None of which seems to have deterred investors looking for more price upside, particularly on the Shanghai market.
January’s metals fever has abated but it hasn’t yet broken. ShFE tin trading activity remains red hot.
Daily volumes on the Shanghai tin futures contract have averaged 345,000 contracts so far this month. That’s the equivalent of the global primary refined tin market being traded every day.
Tin options activity has mushroomed with volumes more than doubling year-on-year to 8.6 million contracts in January to April.
Funds have trimmed bullish bets on the LME but remain collectively long to the tune of 2,414 contracts, equivalent to just over 12,000 tons.
Speculative interest in tin experienced a step-change early last year, when the bullish news was arriving thick and fast.
Tin has also been pulled into the “internet metals” investment meme along with silver and copper.
All three help to hard-wire the internet, in the case of tin in the form of its use as circuit-board solder. Robotics, artificial intelligence and the internet of things represent powerful demand drivers.
All three face structural supply problems. Silver is heading for a sixth consecutive year of supply deficit. Copper is in thrall to a rolling raw materials crunch as mines struggle to scale up production to meet smelter demand.
And tin supply remains highly concentrated and overly dependent on frontier mining zones such as the Congo and the semi-autonomous Wa State, which operates the Man Maw mine in Myanmar.
All three metals are pricing future structural scarcity even though there is no immediate evidence of any shortage.
Tin’s current super-elevated pricing is proof that you can’t keep a good investment meme down even if short-term market dynamics contradict the narrative.
And while that remains the case, it’s hard to see what pulls tin back to the mundane reality of supply and demand.
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Writing by Andy Home;Editing by Marguerita Choy
The opinions expressed here are those of Andy Home, a columnist for Reuters.
