Tin prices have risen to a seven-year high following a production-driven shopping frenzy that drained physical supplies of the commodity.
The dark gray metal, usually associated with cans, has become an important material for the global electronics industry. It is used to make solder – the substance that binds printed circuit boards and wiring together. The shift to home working has spurred demand for computers and other electronic devices, while China has also stockpiled the metal to achieve its goal of semiconductor self-sufficiency, according to traders.
This has led to a supply crisis for a world market that produces 360,000 tons per year. The price of tin for three-month supply on the LME – the smallest by volume of the six major markets offered on the London Metal Exchange – is up more than 70 percent from its low in 2020 to nearly $ 23,400 per tonne .
“Technology usually works against raw materials, but in this case it works for it,” said Maritz Smith, CEO of Alphamin, which produces about 3 percent of the world’s tin from its Mpama mine in the Democratic Republic of Congo.
Other gusts of wind have included the growth of electric vehicles and an increase in US home construction, where tin is used in the chemical stabilizers added to PVC pipe and lining.
On the supply side, production was hit during the pandemic, with some smelters and mines closing due to lockdown restrictions. According to the International Tin Association, Indonesian PT Timah saw its production drop by 40 percent in 2020 to 45,700 tons. CRU, a consulting firm, estimates that supply lagged 8,000 tons last year – a third consecutive year of shortages.
In recent months, a global shortage of empty shipping containers has also disrupted the flow of refined tin. As a result, buyers, particularly in the US, have done their best to buy metal or cash on the spot to meet their consumption needs, offering huge premiums to ensure immediate deliveries.
This was reflected in the price of cash metal, which rose to a record premium of $ 1,850 a ton above the benchmark price for three months last week, before falling to $ 1,695.
The LME’s stocks have also been stripped of metal, hitting a near record low of just 775 tons last week before some tin was added on Monday. With 230 tons already reserved for delivery, the amount of physical metal in the LME system is 1,100 tons, less than two days of global consumption. A year ago, LME stocks amounted to 7,500 tons.
Off-exchange stocks are also considered near critical levels.
“All the major tin dealers are sold out for the first quarter of the year and some smaller ones for the year,” said James Willoughby, market analyst at the International Tin Association.
Given the time it takes to obtain a permit for and dig a new mine, Alphamin’s Smith says the short-term shortage could only be caused by expansion or revival of existing mines. It takes a price of $ 25,000 per ton to make this economical, he estimates.
“The world is not producing enough tin,” added Richard Williams, CEO of Cornish Metals, a tin and copper miner who will be quoted on London’s junior stock market, Aim. “There is a very thin pipeline of new projects.”