LONDON: The world is going to need another 50,000 tonnes of tin per year by 2030 to meet a looming surge in demand, according to the International Tin Association (ITA).
Tin is an often overlooked critical mineral, commonly associated with the humble tin can, even though packaging today accounts for only 12% of global usage.
Almost half the tin consumed every year is now used as a solder in circuit boards. The faster the world moves towards the internet-of-things, the more tin will be needed to glue the expanding metaverse together.
Tin will also benefit from the green energy transition thanks to its use in solar panels and batteries, both lead-acid and lithium-ion. The additional production required to feed the coming demand boom is a big ask of a sector that currently produces around 380,000 tonnes per year of primary refined metal.
A recent history of extreme price volatility and growing resource nationalism in Indonesia, the world’s largest tin exporter, add to the challenge.
The ITA estimates the tin production sector needs around $1.4 billion of investment to deliver 50,000 tonnes per year more tin by the end of the decade.
It’s a relatively modest amount, equivalent to around one medium-sized copper mine, but investors have in the past been wary of a market prone to extreme swings in price.
This year has been a particularly wild ride, London Metal Exchange (LME) three-month tin imploding from a record high of $51,000 per tonne in March to a two-year low of $17,350 in November before bouncing to a current $24,430. Tin’s spin from boom to bust is in part down to COVID-19.
Key producers in Asia and South America were hit hard by lockdowns and quarantines, output at the world’s top 10 operators sliding by 13% over 2020 and 2021.
Demand simultaneously exploded as locked-down populations splurged on consumer electronics to pass the time. Both drivers have gone into reverse this year, producers lifting output just as demand for consumer goods abates.
Tin users expect demand to contract by around 0.6% in 2022 after stellar growth of 7.6% last year, according to the ITA’s annual survey.
The shift in fundamentals, however, has been sharply accentuated by speculative flows on both London and Shanghai markets. Investment fund positioning on the LME swivelled from record long in March to record short in October, equivalent to some 20,000 tonnes of net selling, which is a lot in what is one of the exchange’s less liquid contracts.
Too much rather than too little liquidity is the problem in Shanghai, where volumes and market open interest surged as the price collapsed, suggesting a mass bear attack. The subsequent recovery rally has generated a lot of churn on the Shanghai Futures Exchange (ShFE) tin contract with volumes hitting a record monthly high of 3.98 million lots in November. But market open interest also remains elevated at 98,474 contracts, implying the bears are largely holding their ground. Tin moved onto the investment radar in China last year with a step-change in activity on the ShFE contract. Heightened speculative activity in what remains a small physical market comes with the potential for more price turbulence.
Source: Brecorder
