By Andy Home
LONDON (Reuters) – Investors lost faith in tin’s bull narrative towards the end of 2024, slashing bets on a further rally and helping crash the price.
Tin had been the star performer among the London Metal Exchange (LME) base metals pack until then with year-to-date gains of over 40% in both April and July.
By the end of December, the yearly gain was just 15%. Tin was still the best LME performer but only by a narrow margin over zinc.
Disappointed bulls had been hoping for much more, maybe even a re-run of the super-charged rally of 2022, when LME three-month tin hit an all-time high of $51,000.
It didn’t happen. Tin rose as far as $36,050 in April and never revisited that level despite repeat attempts in both May and July.
Bulls were focused on tin’s troubled supply picture but the demand side of the price equation turned out to be equally problematic. Tin’s fortunes this year will be down to which recovers fastest.
BULLS BAIL OUT
Funds were net long of LME tin to the tune of 3,319 contracts (16,600 metric tons) at the end of the third quarter last year.
It amounted to the largest bull commitment since 2018, when the LME first started publishing a Commitments of Traders Report.
By the close of the year the investment net long had shrunk to just 521 contracts as frustrated bulls threw in the towel and bears sold into the resulting price weakness.
The case for higher prices looked solid with production falling in both Indonesia and Myanmar, the world’s second and third largest producers respectively after China.
Yet there was no indication the market was short of metal. Indeed, Shanghai Futures Exchange (ShFE) stocks of tin rose to an all-time high of 17,818 tons in May. LME stocks eased lower in the first half of the year then stabilised in a 4,000-5,000-ton range in the second half.
DEMAND SLUMP
Why were stocks so stubbornly high when supply was so constrained?
The answer came only in October when the International Tin Association (ITA) released the results of its annual survey of tin users, a rare insight into the state of demand in an under-researched market.
The result was a shocker. Usage had slumped by 3.9% in 2023, a far weaker outcome than the 1.9% contraction users had expected in the previous year’s survey.
Factoring in usage of tin in unrefined form, the 2023 demand slump was even deeper at 4.9% relative to 2022.
Moreover, survey participants, accounting for around 42% of global metal usage, expected only a modest 3.0% recovery over the course of 2024.
Tin usage in new energy applications such as solar ribbon soldering remains strong but insufficient to offset weakness in more cyclical sectors such as consumer electronics and construction.
Look no further to understand why there was no physical tin shortage despite the supply hits in Indonesia and Myanmar.
FRAGILE SUPPLY
Tin’s supply problems are still there.
Indonesia, the world’s largest exporter of refined tin, saw shipments fall by 33% to 46,000 tons in 2024.
The country’s mine production fell by 28% last year due to restrictions on mining quotas for all metals and specific regulatory focus on the tin sector, according to the ITA.
Production in the Wa State of Myanmar fell even harder by 40% due to the continued closure of the Man Maw mine.
The mine accounted for 7-8% of global supply before its suspension in August 2023, which was ostensibly part of a broader audit of minerals in the ethnic group’s autonomous jurisdiction.
Other smaller tin mines have since been allowed to restart operations, which makes the continued inactivity at Man Maw something of a mystery.
The flow of ore across the border to China’s smelters has steadily declined in recent months after the last stocks at Man Maw were shipped.
China’s imports from its neighbour fell from an average of 55,000 tons per month in the first half of 2024 to an average 4,000 tons in the July-November period.
China has stepped up raw materials imports from other suppliers but not sufficiently to compensate for the loss of Man Maw. Total imports of ore and concentrates fell by 35% last year relative to 2023.
The prolonged loss of feed is finally showing signs of constraining Chinese metal production, causing the domestic market to tighten.
The Shanghai stocks mountain has been steadily eroded and now stands at just 6,353 tons. China has also stepped up imports of refined metal, flipping the country from net exporter in the first half of 2024 to net importer in the second half.
DEFICIT TOMORROW
Tin supply remains highly concentrated and the industry is not investing enough in new mines, according to Tom Langston, senior market analyst at the ITA.
The Association is forecasting a global supply deficit of 13,000 tons by 2030 as tin soldering demand gets a twin booster from green energy and artificial intelligence sectors.
There was, however, no sign of market shortfall in 2024, which is why bullish fund managers capitulated over the closing months of the year.
Market balance this year will hinge on whether the demand recovery is extended and on whether either Indonesian or Myanmar production improves.
It is tin’s misfortune that its prospects are beholden to policy-makers in the United Wa State Army.
The opinions expressed here are those of the author, a columnist for Reuters.
(Editing by Kirsten Donovan)
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