Considering the tin price
A perfect storm?
Good morning everyone.
I want to take a few minutes of your time to talk about tin, which may well be on the march to record highs. Indeed, tin is neck and neck with gold for y-oy increases, with both metals up over 40%.
While tin is perhaps not a ‘sexy’ metal, it is critical in all sorts of clean applications - with 10% of tin used as a solar ribbon and glass coating in solar panels. The International Tin Association notes that 49% of tin is used as solder for linking electrical components and circuit boards - in phones, EVs and semiconductors - and arguably, the AI boom is not yet factored into the tin price as yet.
Worse, the miners are not recognising either the current price increases, or those likely to come.
For perspective, BMI considers that tin prices will reach $45,000 by 2033, more than double the 2016-2020 average of $18,729. And the outfit expects the market will enter a deficit from 2028 onwards:
‘On the supply side, a thin pipeline of tin mining projects will tighten the tin concentrate market, leading to increased competition among smelters and constrained ore feed for refined output growth. On the demand side, the global use of tin will increase rapidly through the metal’s use in electronics (especially as electric vehicles increasingly contain greater amounts of electronics in their body) and solar panels (in photovoltaic cells), cementing tin’s status as a commodity of the future.’
Let’s consider the price history:
Top global producers including China, Myamar and Indonesia are under extant pressure, and further, there is a global lack of undeveloped high-grade projects.
During the 2008 financial crisis, tin stood at around $10,000 per tonne — but subsequently tripled to over $30,000 by 2011 as the global economy recovered. However, by 2015 oversupply and weak demand pushed the price briefly below $14,000.
Three years later, the market rebounded to around $22,000 due to supply shortages and a weak US dollar, but by 2019 tin demand was again declining due to reduced semiconductor demand resulting from ongoing Sino-US trade wars.
The covid-19 pandemic further impacted global trade, causing tin prices to drop to approximately $13,400 per tonne during the March 2020 mini-crash. Nevertheless, the market began recovering as automotive, electronics, and solar industries swiftly rebounded and entered new growth phases. Supply chain disruptions and soaring freight costs further limited tin availability, leading to a price rebound.
In 2021, tin prices surged by nearly 90% to >$39,000 per tonne on the London Metal Exchange, marking the largest annual increase since the relaunch of tin trading in 1989.
For context, tin had been suspended for four years, starting from 1985, after the collapse of the International Tin Council, which had attempted to stabilise prices through buying low and selling high using a tin reserve. This led to a market crash when the council ran out of funds.
By November 2021, tin stocks in LME-registered warehouses had hit their lowest levels since 1989 due to strong demand outpacing supply from major producers. Chinese producers faced electricity supply restrictions, Myanmar experienced ore export disruptions due to Covid-19 restrictions and political unrest, and production shutdowns were rife in major producers Malaysia and Indonesia.
The rally in tin prices continued into 2022, with record highs of $50,000 per tonne breached in March as commodity markets reacted to Russia’s invasion of Ukraine and its potential impact on global supply chains. However, prices have since declined to circa $33,000 per tonne due to high inflation and higher interest rates that have slowed down demand (for now - rates are coming down).
The key point to understand is that while tin plays a vital role in multiple technologies, its market is much smaller and less liquid than other metals like copper or aluminium. This means that very small changes in supply and demand can massively affect tin prices — which goes some way to explaining volatility.
And in 2024, tin is going through another perfect storm.
Aside from the very thin market, the other factor to consider is that global tin production is overwhelmingly dominated by three countries: China, Indonesia and Myanmar.
China alone poses a ‘risk’ to western supply - export controls on Germanium, Gallium, Graphite, Antimony (and presumably soon Tungsten) show just how quickly a major source of tin can be turned off - and China will continue to ban metal exports in response to the US’s stance of restricting China’s semiconductor access.
On the US side, tens of thousands of workers at 14 major ports (members of the International Longshoremen's Association) have gone on strike indefinitely - halting container traffic from Maine all the way down to Texas.
This is the first shutdown in five decades - and the only man capable of suspending the strike (The President) has already declared he will not.
The US Maritime Alliance, which represents shipping firms, port associations and marine terminal operators has now offered to raise wages by almost 50%, triple employers' contributions to pension plans and strengthen their health care options (the last point being more important than investors think, given the lack of universal healthcare stateside).
It’s possible that negotiations could drag on for some time; yes, the ports are losing money, but this is a long-term deal which will set profit margins for years to come.
Food and agriculture, clothing and tobacco will all take a hit, but tin was named by Oxford Economics as the metal likely to see significant disruption.
Meanwhile in Indonesia, refined tin exports slumped by 54% year-over-year during H1 2024 due to continued delays in government approvals of mining companies’ annual work plans, alongside more stringent export controls. This was at least partially due to severe environmental degradation at major mines - and this ultracheap supply based on low opex will likely become more expensive as the government imposes environmental penalties.
But perhaps the biggest supply problem in terms of longevity is in Myanmar, from which almost all production is derived from the Man Maw mine. Operations have still not restarted, unlike other mines controlled by the Wa militia - and this is having a bruising effect on supply.
Until now, large stockpiles of tin have stopped price rises - predominantly because China was warned in April 2023 that tin production would be suspended in the country a few months later.
But these stockpiles are now pretty much used up, and Man Maw still does not look to be reopening anytime soon. The Wa militia closed all mining and processing in August 2023, and while other smaller mines have been allowed to reopen - and current above ground tin stocks at Man Maw have been allowed to be exported - production at the mine remains suspended.
Therefore, tin exports from Myanmar to China are collapsing.
The problem is that there are no reliable production statistics to prove this: but using International Tin Association data, most analysts think Myanmar produces circa 40,000 metric tons per year, the lion’s share from Man Maw which generates circa 8% of global supply.
The Wa militia maintains it is continuing to audit the tin sector, but a delay of over a year may suggest something bigger has gone wrong on site. For context, Reuters notes that:
‘China imported 100,000 tons of Myanmar tin concentrates in the 10 months after the start of the audit in August 2023, compared with 173,000 tons in the prior 10-month period. Trade flows between the two countries slowed to just 11,300 tons in the second quarter of this year from 43,600 tons in the first quarter, suggesting a depletion of above-surface stocks.’
Another clue to what’s about to happen? The world’s largest refined tin producer, Yannan Tin, shut its major Geiju smelter for 45 days of maintenance at the end of August. Meanwhile, SMM analysis suggests that refined tin smelters in Yunnan and Jiangxi provinces are operating at a capacity rate of only 37.25%.
And worse, SMM argues that some beneficiation plants are using tailings for production - and if Myanmar exports continue to remain restricted - some plants will have no ore to process at all.
For perspective, Shanghai Futures Exchange stocks rose to an all-time high of 17,818 tons in May - and stocks now stand at just above 9,000 tons. At the LME, tin stocks are down circa 40% year-to-date to 4,725 tons. And the stock slide is not going to stop.
Where can new ore come from?
Alphamin’s world-class Bisie Project in the DRC now generates circa 4% of supply, and continues to be good value as it grows - but my top pick remains Rome Resources, which is drilling the adjacent Bisie North asset with four diamond drill rigs, is managed by the same exploration team which discovered Bisie, and is fully funded to declare a resource by the end of 2024.
Explosive upside awaits.