Shortage of supply will strengthen tin price in coming years

At the recent Prospectors and Developers Association of Canada conference, corporate advisory firm Hallagarten & Co’s principal and mining strategist, Chris Eccleson, spoke of how tin’s muted performance in 2014 obscured the potential for price rises and robust margins in the coming years. Eccleson revealed that most commentators and market participants believed that current prices represented a trough, and concluded that “overall, we have things set up for a pretty bullish-looking scenario in tin for the next few years.”

Discussing the global tin market, Eccleson noted how Indonesia, Malaysia and China were currently closed markets, and Bolivia and Burma were attached with high political risks. He said that there had been some interest in the old Australian regions, which is positive news for developers and explorers such as Stellar Resources.

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Lower sales predicted for fourth quarter: Indonesian smelters polled

Bloomberg recently carried out a poll among Indonesian smelters assessing future exports. The results indicate an expected median export of 16,000 tonnes for the fourth quarter of 2014. Lower prices and stricter controls are cited as drivers behind the prediction.

However, ITRI predicts Q4 exports between 20,000 and 25,000 tonnes, though does concede that “controls on illegal mining do appear to be getting tighter and the new export regulation will greatly reduce exports of tin in non-ingot form”.

ITRI’s predicted export rate would still place annual exports at around 80,000 tonnes, the lowest since 2007.

Over the past few months, Indonesian police have been cracking down on illegal tin mining – particularly in protected areas – and these tightened controls combined with dropping prices and new export regulations are likely to have contributed to lower sales.

The new regulations will come into effect from November 1 and are likely to impact the price of tin.

Source: ITRI

Indonesian smelters setting their own tin price

Bloomberg reported that trade on the Indonesia Commodity and Derivatives Exchange (ICDX) was weak due to the country’s tin producers holding out for sales above the benchmark spot rate in London to try to counter a decline in prices.

Citing almost a USD$400 premium, smelter members on the ICDX were offering prices between USD$500 – USD$600 a metric ton above the contract on the London Metal Exchange.

The opinion from Peter Kettle of International Tin Research Institute (ITRI) was that Indonesian sellers were not prepared to follow the London Metal Exchange price down.

David Lennox, a resource analyst at Fat Prophets commented that the Indonesian members could be testing the market and if the reaction was positive then maybe there was some underlying strength in the market.

The Bloomberg article also said smelters don’t want to sell cheap because ore prices are very high and prefer to build up stockpiles, on expectations that the price will rise to a decent level, probably at USD$23,000 a ton.

The decision was defended by Jabin Sufianto, chairman of Association of Indonesian Tin Exporters, stating that the weak trade on the ICDX was simply because of the price.

Trade on the ICDX totalled 4,855 tons in August, 3,810 tons in July and 4,660 tons in June, exchange data show. On September 11 cargoes of the metal were sold above the London price and prior to that the last trade was on August 27, when the PB300 contract, the most active, was at $22,080 a ton. That was $398 above the LME spot price that day, Bloomberg calculations show. Inventories tracked by the LME climbed 4.4 per cent to 12,295 tons in August. The reserves dropped 1,085 tons to 10,210 tons yesterday, the lowest since May, according to LME data compiled by Bloomberg.

Implemented by the Indonesian government, the minimum price for tin contracts is decided by an exchange committee in the ICDX daily. Sales made through an auction system can’t be made below this daily rate, which is officially known as the Suggested Opening Bid.

According to BNP Paribas SA, it is reported that the global demand for tin will outstrip supplies for a fifth year in 2014. The market will have a global deficit of 13,000 tons this year and 10,000 tons in 2015.

Source Bloomberg: Tin Smelters in Indonesia Holding Out for Premiums to LME