Column: Tin ticks all the boxes for basic supercycles: Andy Home
LONDON, Nov. 8 (Reuters) – Tin remains the superstar of the London Metal Exchange (LME) industrial metals pack.
At $ 37,350 per tonne, the three-month LME tin is up 77% year-to-date, far surpassing aluminum, which is the second best performer with a gain of “only” 26%. .
The London tin market has been characterized by extreme supply tension since February. The liquid metal premium closed last week at $ 1,050 per tonne, an unprecedented level until this year.
LME stocks total only 720 tonnes, having failed to replenish despite the huge incentive for physical delivery. Shanghai Futures Exchange stocks fell to 1,256 tonnes and between them the two end markets hold enough tin to cover a minimum of two days of global demand.
There have been a few flash crashes in recent months and there could be more. But even if it were deviated by 20% by a tsunami of sales, the price of tin would still be near all-time highs before 2021.
If a supercycle means a permanent change in higher price, then the tin ticks the right boxes.
LME tin is expected to average $ 30,580 a tonne next year, according to 16 analysts who participated in the latest Reuters base metals poll.
The lowest forecast was $ 25,250, well above the highest forecast of $ 22,000 made in the January survey, which generated an average expectation of average prices of $ 19,800 per tonne in 2022.
It is clear that there has been a fundamental overhaul of the long-term price environment for tin.
Fitch Solutions is just one of many upward revisions to price expectations. It has just raised its 2022 forecast from $ 26,000 to $ 32,500 per tonne.
Fitch analysts expect “tin market fundamentals to ease slightly by 2022, driven by increased supply”, but “to remain on an uptrend solid over the next decade “with an average price of $ 35,500 by 2030.
The common theme behind these high forecasts is that tin needs a period of higher and sustained prices to incentivize supply.
The global supply chain, which is dominated by a handful of producers, has been deeply shaken by COVID-19 and some sort of normalization is expected in the coming months.
Malaysia’s MSC is hoping to restore capacity after a series of furnace failures and lockdowns, while Chinese producers appear to have largely escaped the country’s latest energy crisis. Chinese tin production increased 2.8% month-on-month in October, and cumulative production increased 15.1% in the first 10 months of the year.
China this year became a net exporter of refined tin to the tune of 9,800 tonnes. Shipments of 1,107 tonnes in September included 291 tonnes to the Netherlands, 225 tonnes to Italy and 40 tonnes to Romania, testifying to the gaps that have opened up in the European physical supply chain.
However, Chinese producers have become increasingly dependent on raw materials from neighboring Myanmar, which has become the world’s third-largest supplier over the past decade.
Tin has a long history of great geological discoveries by artisanal miners and Myanmar is the most recent example, although it is already showing signs of depletion of the grade.
Investments in the formal mining sector, by contrast, have remained extremely uneven, with tin falling under the radar of investors and large mining companies.
If this is to change, the price will have to move into a higher range and stay there for a few years to attract serious investment in new production capacity.
The reason the tin market needs more supply is that its usage profile has changed over the past 10 years, positioning it to benefit from the energy transition and a fourth industrial revolution.
While commonly associated with the tin can, packaging only made up about 12% of global refined tin use last year, according to the International Tin Association (ITA).
Most of last year’s demand – 48% – came from the electronics industry, where tin is used to solder circuit boards. And the booming demand for electronics is expected to lead to a 7.2% increase in global tin use this year, according to the ITA’s annual survey of tin users.
Consumers will try to reduce the use of tin, but the miniaturization of tin solders has been a common industry theme over the past decade and reaching its technical limits. Indeed, tin is expected to benefit from the final stages of lead removal from solder over the next two years.
The energy transition and the so-called Internet of Things are just ticking more boxes for the use of tin, whether in electric vehicles, photovoltaic cells or 5G infrastructure.
Pewter has been described as the forgotten infantryman of the green energy transition. It’s the metal that slips through the cracks and still doesn’t get as much media coverage as lithium, nickel, and copper.
But it is showing all the signs of being the first to experience a price supercycle.
Demand has changed structurally from the days when most tin was used in cans of long-lasting foods. Metal is literally wired into everything electronic, opening up an ever-widening spectrum of next-gen uses.
The offer, on the other hand, has been so challenged that the ITA estimates that the global refined tin market has experienced supply shortages in four of the five years leading up to 2020.
The formal mining sector has suffered from decades of underinvestment and it can be argued that tin has avoided a supply shortage previously through only artisanal discoveries.
Relying on the fortuitous discoveries of the informal sector is by no means a sustainable procurement solution.
The recent consensus among analysts is that the price of tin must become supercyclical to balance the market in the years to come.
Reporting by Andy Home Editing by David Goodman
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