The tin price roller coaster ride isn't over yet, writes Andy Home.
Industrial metals have flipped from boom to bust in the space of six months as the market focus shifts from supply-chain problems to the darkening demand outlook.None, however, has imploded quite as spectacularly as tin, the London Metal Exchange three-month price collapsing from an all-time peak of $51,000 per tonne in March to a current $20,700.
Supply-side scarcity has been alleviated in recent months, but not to the extent implied by the scale of the sell-off, which may mean trouble ahead for the army of Chinese shorts.Not many investment players participate directly in the London tin market, but those that do started reducing their long exposure almost as soon as tin hit its March high.
The Shanghai tin contract registered volumes of over three million tonnes in both June and July, a massive turnover given global tin production last year was just 378,000 tonnes and the LME contract with its multiple spreads traded 771,000 tonnes over the same two months combined. Last year’s price rally has incentivized more supply, particularly from Indonesia, the world’s largest exporter.
Demand, meanwhile, is softening. Global semiconductor sales, a proxy for tin usage in circuit-board solders, are slowing. Sales in the second quarter rose by just 0.5% relative to the first three months of the year, with June sales down by 1.9% on May, according to the Semiconductor Industry Association.
There are now 4,605 tonnes of tin in the LME warehouse system, up from a critically low 645 tonnes in November last year.Ironically, the only part of the global tin market that still looks short of metal is China.
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