Didn't think smart phones could get more pricey? Think again
Workers apply Dolores brand labeling to tuna cans at the Grupo Pinsa processing plant in Mazatlan, Mexico. Photo: Bloomberg/Susana Gonzalez.,
18 of March 2016 15:47:37
JOE DEAUXTHE WASHINGTON POSTSmart phones, cars and a prolonged mining slump are creating tighter supplies of tin, a metal used mostly as solder for electrical circuits.Demand for tin remains strong from all sorts of manufacturers, from makers of food cans and building materials to iPads and Oscar statuettes. At the same time, big exporters like Indonesia and Myanmar are shipping less, following a three-year slump that discouraged investment in mines and smelters. Supplies in 2016 will be the smallest relative to demand in almost two decades, industry forecasts show. Tin on the London Metal Exchange has surged into a bull market, after prices in January were at their lowest since 2009.Unlike most other base metals, which face global surpluses this year, tin output won't keep pace with demand, according to Minsur, a Peru-based producer. While economic growth is slowing in China, the biggest consumer, reduced production has sent tin inventories tracked by the LME to a seven-year low this month.Customers at metals wholesaler Phoenixx International Resources LP in Pittsburgh are locking in prices two months before delivery rather than risk paying more later, something they haven't done since 2014."People are jumping in to grab some, saying they think it's a good price," said Phoenixx President Brian Helsel, who has been trading tin for almost two decades. "Based on the fundamentals, I think the bottom of the tin price should be now in."
it might be a bit difficult for tin to go in one direction while everything else is going the opposite way."-Peter Kettle. ITRI manager of marketsTin for delivery in three months on the LME rose as high as $17,150 a metric ton on Friday, up 31 percent from a six-year low of $13,085 on Jan. 14. Prices are up more this year than any other base metal tracked by the exchange. Societe Generale, in a report emailed March 16, said the cash price for tin will reach $18,000 next year, citing rising demand and reduced supply from unprofitable mines.As recently as January, the outlook wasn't so bullish. While Indonesia, the top exporter, had banned ore shipments in 2013 to spur investment in its domestic smelting industry, that loss of supply had since been made up in part by increased shipments from Myanmar, which went from the world's 12th-biggest producer of mined metal to No. 3 by last year. Myanmar's output jumped 11-fold from 2012 to 24,000 tons in 2015, according to the World Bureau of Metal Statistics.But more tin from Myanmar hasn't been enough to compensate for production cuts, including from major mines in China. Demand will exceed output by 13,000 tons this year, the biggest deficit since 1995, according to the International Tin Research Institute. Robin Bhar, an analyst at Societe Generale, forecast another shortfall next year, because prices remain below the cost of production.Anything less than $17,000 would mean more reductions because 15 percent to 20 percent of production can't make a profit at that price, said Juan Luis Kruger, the chief executive officer of Lima-based Minsur, the world's third-largest producer. CPM Group, a researcher, estimates the industry's average cost is about $14,800, though it may be as low as $12,000 in Indonesia."The biggest factor for pushing the market into deficit is going to be that supply will be fairly weak," said John Davies, London-based head of commodities research at BMI Research.[caption id="attachment_7511" align="alignleft" width="300"] New sources in Myanmar are the sole bright spots in tin's future. Will the cost of your tuna sandwich be going up? Photo: Creative Commons[/caption]While the emergence of Myanmar as a supplier was a surprise to everyone over the past two years, there aren't any more sources of tin that can be tapped at current prices, especially with the ban on ore exports limiting supplies from Indonesia, the largest producer after China, Davies said.Tin is defying the trend of rising supplies for other base metals. Global aluminum production will exceed demand by 667,000 tons this year, according to researcher Harbor Intelligence. Copper is headed for a surplus of 253,000 tons, according to Barclays Plc.The slowing economy in China may limit the shortfall for tin. While global supply probably declined 8 percent last year, consumption of the metal fell 3 percent and was forecast to remain flat in 2016, according to the International Tin Research Institute.Half of tin demand comes from the electronics industry, and most of that manufacturing occurs in eastern Asia, where demand growth has been threatened by slowing economies in China and Japan, according to Peter Kettle, the manager of markets at ITRI in London."There is still a need for more confidence in the outlook for demand and the world economy in general before anyone gets very excited, and it might be a bit difficult for tin to go in one direction while everything else is going the opposite way," Kettle said.