Page 53 - pd299-Nov21-mag-web_neat

oPInIon

Another month of wild rides

on tin rollercoaster

ondon Metal Exchange (LME) three- tin hit record highs. The unwind of some of Chinese stocks now look as depleted as
Lmonth tin hit an all-time high of that speculative length undoubtedly exacer- those in the West.
$US36,830/t on September 24, slumped bated the whipsaw action. Given such a stuttering supply response,
by 12% to $US31,305 by October 1 and In China, meanwhile, the ShFE hiked its there is a consensus among analysts that
had whipsawed back to a new record of intraday trading fees on the November tin tin is heading for another year of supply defi-
$US37,800 by October 13. contract effective October 8, a sure sign that cit. The only question is how big it will be.
It is still up by more than 60% on the start the exchange is concerned about specula- All of this is hard-wired into the record
of the year, outpacing all the other LME base tive activity. high price and accentuated level of price
metals. But there is no doubt that supply shortfall volatility.
This has inevitably attracted the interest of is the core driver of the current wildness. Some alleviation of global supply-chain
funds and speculators, on both the London And while that remains the case, it’s hard stresses is set to come in the unlikely form
and Shanghai exchanges, which has exac- to see the rollercoaster ride ending any time of China’s power crunch.
erbated volatility in what is a small global soon. While power rationing earlier this year
market. Demand for tin has been booming thanks impacted tin producers, the current round
But tin is also displaying all the features to a resurgent electronics sector. of cuts is focused on provinces such as
of scarcity pricing with exchange stocks sit- Semiconductor sales, a useful proxy for Guangdong and Jiangsu, major centres of
ting at record lows and time-spreads super- tin usage in soldering, surged by 29% year- tin demand.
stressed. on-year in the second quarter of 2021, ac- Soldering, tin-plating and tin chemical
Some producers are still struggling to cording to the Semiconductor Industry As- plants have been required to reduce operat-
shake off the lingering effects of the pan- sociation. ing rates, drastically in the case of Jiangsu,
demic, restricting supply just when the mar- Quite evidently, the world’s major pro- according to the International Tin Association.
ket needs it most. ducers have struggled to respond with the “With the focus of the measures more on
Short-term relief is more likely to come global supply chain suffering long-COVID tin demand than supply, the tightness in the
from the demand side in the form of China’s symptoms. Chinese market could ease considerably,” it
power crunch, which is now rolling through Malaysia’s MSC is currently operating its said.
the country’s manufacturing sector. main smelter at 80% staffing levels due to Frankly, the tin market could do with a
What is decidedly bad news for other a third wave of the pandemic, as reported breather, not just for those currently trying
metals may save the future day for tiny tin. by Fastmarkets. The company’s force ma- to ride the rollercoaster but also in terms of
The tin market has been wild since the jeure, down to both COVID-19 and furnace future demand.
start of the year. In London the benchmark problems, remains in place. The combination of record high prices
cash-to-three-months spread and price volatility is any metal
exploded to a backwardation of user’s worst nightmare. Tin buy-
$US6,500/t in February. Demand for tin has been booming ers have faced both and record
The cash premium has re- “ thanks to a resurgent electronics physical delivery premiums for
mained volatile ever since, flex- most of this year and it’s not
ing out to $US2,500 at one stage sector. Semiconductor sales, a useful going to persuade them to use
on October 1. proxy for tin usage in soldering, surged more of the stuff.
Time-spreads are driven by The threat is spelt out by
stocks’ availability and right now by 29% year-on-year in the second analysts at Macquarie Bank,
there are only 1,235t in the LME quarter of 2021, according to the who forecast persistent supply
warehouse system, or an even Semiconductor Industry Association. deficits through 2026 with off-
more depleted 600t excluding exchange inventory “also likely
metal earmarked for physical to reach critical levels over the
load-out. coming years”.
Stocks registered with the Shanghai Fu- Indonesia’s PT Timah is trying to catch up Sustainable supply-demand equilibrium
tures Exchange (ShFE), where the forward from the first half of the year, when produc- in the tin market will only be achieved “by
curve is also in steep backwardation, total tion slumped by 57% due to lockdowns. Its delivering progressive demand destruction
just 1,272t. They were close to 9,000t as re- guidance for full-year output is unchanged or unearthing currently unaccounted for
cently as March. at 30,000t. sources of supply growth,” the bank said in
Between them the two exchanges hold Indonesian exports hit a year-to-date high September.
the equivalent of around two days’ worth of of 7,500t in August but the cumulative Jan- A bit of short-term mandatory demand
global consumption, an extreme degree of uary-August tally of 46,550t was still up by destruction in the form of power cuts in Chi-
scarcity both by historical standards and by only 5% on the same period of last year and na may actually be in tin’s long-term interest.
comparison with any other metal. by just 2% on pre-pandemic 2019. And, given no circuit-board currently oper-
Speculative flows have accentuated China has lifted its exports to help fill the ates without tin, they may be in everyone’s
some of the wildness. Money managers gap to the tune of 11,500t in January-August interest.
lifted their collective LME net long position but outbound flows noticeably dropped to a – Andy Home, Reuters
by 746 lots, equivalent to around 4,500t, as six-month low of 788t in August itself and

aUSTRaLIa’S PaYDIRT NOVeMBeR 2021 Page 53