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Strong year ahead for tin prices: analysts

Keywords: Tags  tin, prices, Hartleys, analysts, note, supply, demand

LONDON — Tin prices will improve in the medium to long term as a supply deficit is expected this year, according to industry analysts.

"Though the price of tin could be volatile in the short term, medium- and longer-term fundamentals remain strong for continued improved prices, with every prospect of a supply deficit this year," analysts at Australian financial services company Hartleys Ltd. said in a note Feb. 11.

"Market commentary on tin demand highlights some improvement as solder use picks up, driven by increased consumption (by the) electronics and home appliances solder end-use market," they added.

Tin was the best-performing base metal in terms of price in 2012, the analysts said, rising about 24 percent from $18,950 per tonne at the end of 2011 to a final price of $23,500 per tonne at the end of 2012.

Tin prices have continued to rise this year, having broken through $25,000 per tonne more than once this year.

"Ongoing tin supply constraints imply the tin price will further strengthen, especially in the medium to longer term," the Hartleys analysts said.

"Tin is rated (on a four-year outlook) to be the second-best-performing metal behind palladium, and remains BNP Paribas’ favorite base metal," they added.

Supply will tighten this year, the analysts said, as leading tin producers in China and Indonesia have cut back their output due to the rising cost of extraction.

In Indonesia, tin operations are mainly offshore, they said, and are becoming more expensive because of fuel costs, while China’s mines are generally low-grade and underground, with a production level of about 100,000 tonnes per year for the past 10 years.

"China also has an increasing gap between refined tin and mine output, being net importers," the analysts said.

"Supply from Central Africa (including the Democratic Republic of Congo) is also under pressure to comply with international standards—i.e., (to) remove conflict tin from the market—which means supply to some large smelters (will be diminished)," the note highlighted.

New investment is now required in mining projects to meet increasing demand and cover the predicted decline in supply, the analysts said.

However, the quality of some existing tin projects is suspect, the analysts added, as some are not compliant with Joint Ore Reserves Committee codes or are in high-sovereign-risk countries, while others have processing issues and are in need of other metals in order to be profitable.

"The tin market is small but growing, currently about 350,000 tonnes per year, or about $10 billion," the analysts said. "Market growth is expected to come from electronics—solder use, (the move) toward totally lead-free solder, which means tin solder moves from 70 percent to 100 percent of the market, which is forecast to add demand for another 20,000 tonnes per year."

New markets are also emerging for tin in the development of long-life batteries, as the metal can boost battery life, as well as in stainless steel, where tin can replace a small amount of chromium without compromising strength, which brings costs down.

Tin also has uses in fuel catalysts, as some tin alloys are able to improve fuel economy with fewer emissions, the analysts added.

Leading tin refiners are likely to look to secure new sources of supply, as some of the largest producers of refined metal either have no mining assets at all or assets with very short mine lives. End-users are also moving downstream to secure supply, the analysts said.

A version of this article was first published by AMM sister publication Metal Bulletin.

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