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Tin was billed as the safest bet among the base metals this year, with a supply deficit expected to maintain prices. But as seen in the past, rapid changes in the supply situation resulted in price volatility in an industry where production is in the hands of a few large producers.
Tin is currently trading at $20,100 a tonne on the London Metal Exchange, slightly below its five-year average price of $20,108.2/tonne. The metal achieved a historic high of $33,300/tonne in April 2011, but has declined sharply since. In 2013, the metal has fallen 17.8 per cent since January.
In particular, the difficult economic conditions globally dampened the sentiment in tin. But demand conditions could witness a rapid reversal: it has been seen in previous years that consumers tend to time their purchases into price swings to garner the maximum benefits.
What is more, producing countries such as Indonesia might curtail supply to derive maximum revenues. A similar trend has been seen in China, where traders import in times of price weakness and re-export when prices are higher.
In 2012, global tin production stood at 3.6 lakh tonnes, down 10,400 tonnes in comparison to the previous year, according to the World Bureau of Metal Statistics (WBMS). In the 2005-10 period, refined tin production averaged 3.5 lakh tonnes.
Demand firms up
Bottlenecks have cropped up at the mining stage, with output in 2012 amounting to just 2.8 lakh tonnes, compared with an average 3.3 lakh tonnes between 2005 and 2011. This has been compounded by declining ore grades and government intervention to preserve national reserves when prices are low, deterring investment in new production capacities. Demand, on the other hand, has firmed up on the back of renewed economic activity globally. Tin’s primary use is in soldering of components for electrical items, white goods and IT hardware, which accounts for 52 per cent of consumption. With consumer spending expected to remain robust in the medium-term, demand for tin for soldering purposes is likely to continue unabated.
Furthermore, improved sales in the IT industry will be a major demand driver for tin.
Besides electronics, tin is used in tinplating, chemicals, brass and bronze and to float glass. Tinplating accounts for about 16 per cent of consumption, while the metal’s use in chemicals has been rising and constitutes 15 per cent of consumption. Brass and bronze account for 5 per cent of demand.
Tin consumption fell by 6.2 per cent to 3.6 lakh tonnes in 2012, according to WBMS data, but is expected to rise 4 per cent this year as the global economy continues on the path to recovery. This implies a supply deficit of around 9,000 tonnes globally during the year, which will exert upward pressure on prices.
Tin is traded on the MCX commodity exchange in India. Prices, however, are dictated by international supply and demand dynamics.
The country’s production of tin is just 10 tonnes and it meets most of its requirement through imports. The country’s imports are estimated at around 4,000 tonnes of tin and its alloys, including scrap, every year.
Tin consumption is picking up in the country on the back of growing use of the metal for packaging purposes. The market size of the tin plate packaging industry has been estimated at around 3 lakh tonnes. Tin plate is mainly used in the country for packaging of edible oil and cashew, processed food and non-food products.
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