Tin seeks equilibrium after surge in volatility
The global tin market is attempting to reestablish equilibrium after a period of massive price volatility because of Covid-19 and inventory shortages, followed by a slump in demand owing to Chinese economic downturn and uncertainty.
Prices for three-month delivery tin on the London Metals Exchange (LME) plunged to $17,965/t on 31 October 2022 after reaching an all-time high of $49,450/t on 8 March 2022. Prices recovered to $32,097/t on 27 January 2023, before falling back to $23,612/t on 8 March this year. Tin prices were under $14,000/t in March 2020.
Refined tin output was higher by 0.3pc on the year at 380,400t in 2022, according to provisional data from the International Tin Association (ITA), although the market share of the top 10 producing firms fell to 56pc in 2022 from 59pc in 2021. ITA expects a marginal rise in production in 2023, as increased Chinese output is likely to be offset by lower production in other major producing countries such as Indonesia and South America.
While the short to medium term outlook for tin appears vulnerable to economic realities, including the impact on consumers of higher prices for tin-containing electronic goods, outlook will improve in the longer term from the ongoing growth of the solar and electric vehicle (EV) sectors.
Tin usage for solar ribbons on panels was around 22,000t in 2022 and is expected to grow to 55,000t by 2030, while the EV sector is expected to consume 10,000-20,000 t/yr of tin by the end of this decade, ITA said. EVs are typically more tin-intensive than internal combustion engine vehicles.
Almost 50pc of tin demand comes from soldering for electronic circuit boards, where it has replaced lead as the dominant raw material, ITA said.
Historically low inventories and reduced output resulting from Covid-19 lockdowns were the main causes for tin prices to surge in 2022. But this unprecedented price spike reversed as soon as inventories recovered, along with weaker macroeconomic conditions, skyrocketing inflation and higher interest rates, which have also weighed on several other base metal prices. Aluminum prices fell to $2,335/t on 8 March from over $3,700/t a year earlier, while copper fell to $8,824/t from $10,000/t and nickel dropped to $23,662/t from $48,000/t over the same period.
Potential upsides for tin demand and prices include a possible Indonesian ban on exports of tin ingots, a thin pipeline for new projects and increased competition in the tin smelting business.
The pandemic, Chinese dominance of raw material and downstream markets, and the ongoing Russia-Ukraine conflict have driven many countries to bring supply chains closer to home. The ITA expects more localisation of tin smelters around the world as currently all toll smelters are in Asia. Most Chinese smelters suspended operations in the third quarter of last year, bringing forward maintenance shutdowns because of falling prices and stifled demand.
Analysts expect the imbalance between supply and demand, and geopolitical and economic factors to continue weighing on tin prices in 2023. They expect the average price for soldering metal this year to fall below last year's average of $30,959/t, which could hinder appetite for development of new projects, as ITA regards $30,000/t as the base price required to attract new investment.
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