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The London Metal Exchange (LME) tin price has surged to near two-year highs this week as exchange inventory slides and yet another threat to an already stressed supply chain emerges.
LME three-month metal hit $33,130 per metric ton on Wednesday, a level last traded in June 2022. Currently trading at $32,000, tin is now up by 27% since the start of the year. Copper, the second-best performer among the LME base metals suite, is up by a comparatively modest 10% since the start of January.
Speculative buying has played its part in the sharp rally, with fund positioning as bullish as it’s been since March 2022, when the price was on a super-charged run to above $50,000 per ton.
Tin is clearly back in the spotlight as investors buy into the market’s bull narrative of resurgent demand and challenged supply.
Already facing disruption in Indonesia, the world’s largest exporter of metal, and Myanmar, home to the world’s largest mine, tin is now facing a third threat in the form of escalating violence in the tin-rich province of North Kivu in the Democratic Republic of Congo.
Kivu has long been a hub of artisanal mining for the so-called “3Ts”, namely tin, tantalum and tungsten.
It is also home to the Bisie tin mine, which was once artisanal but is now mechanized and operated by Alphamin Resources. Bisie produced 12,600 tons of tin in concentrate last year, accounting for around 4.5% of global supply.
Material mined from both Bisie and artisanal sources flows across the Goma border crossing with Rwanda, a part of the country that has fallen under the control of the M23 rebel group.
The increasingly violent confrontation with government forces has displaced an estimated 800,000 people and key access roads to Goma are now under rebel control.
The International Tin Association (ITA), which has been monitoring the fast-deteriorating situation in North Kivu, notes that while there is no evidence yet of tin exports being halted, “delays may be expected as mineral shipments are rerouted further north and south away from rebel-controlled areas.”
It’s the last thing Asian smelters need right now, given the continued uncertainty around the status of the Man Maw mine in Myanmar.
The mine is controlled by the semi-autonomous Wa State, which ordered the suspension of mining activities last August. Surface stocks have continued to be shipped across the border, but Chinese smelters have been lifting imports from other countries to compensate, including the Congo.
At least one tin supply disruption is abating as Indonesian authorities catch up on delays to the annual export licensing process.
Two of the country’s largest producers, including PT Timah, have now restarted exports, according to the ITA.
However, the sharp drop in Indonesian shipments to just 55 tons over the first two months of this year is already tightening the Western market.
LME headline tin stocks have slumped by 46% to 4,145 tons since the start of the year and are now the lowest since last July. Excluding metal earmarked for physical load-out, available stocks are just 3,650 tons.
The stocks squeeze has rippled through LME short-dated time-spreads. In the space of three weeks, the benchmark cash-to-three-months period has shifted from a contango of more than $200 per ton to a backwardation of $84 as of Wednesday’s close.
The draw on LME stocks also attests to a demand recovery in the electronics sector, where tin is used in circuit-board soldering.
The sector, accounting for about half of all global tin usage, saw falling sales last year as a cost of living squeeze in many Western countries suppressed demand for new purchases of electronic goods.
However, semiconductor sales, another useful indicator of electronic goods demand, seem to have troughed around the middle of last year and have been recovering ever since. Global sales in February were up 16% on last year, according to the most recent figures from the Semiconductor Industry Association.
It’s noticeable that the tin price has been closely tracking the Philadelphia Stock Exchange Semiconductor Index, which has surged by 52% from its January low.
But the two have diverged over the last few days, suggesting that tin is now trading on its own momentum as much as its fundamentals.
Fund money has surged into the London tin market and positioning is now as bullish as it was during the mega rally of 2021 and early 2022.
Investment funds have lifted long positions to 3,134 contracts, which is the highest level since the LME started publishing its Commitments of Traders Report in 2018.
The position is equivalent to 15,670 metric tons, which doesn’t sound like much until you consider the level of LME inventory.
Funds are net long of the tin contract to the tune of 2,371 contracts, which is just short of the March 2022 peak. That’s down to the fact there are still shorts in the London market, whereas there were almost none when the price was rocketing up to $50,000.
It’s worth noting that positioning in the LME’s “Other Financial” category, which captures index and insurance entities, flipped to net long in January with the position now at 328 contracts, the most bullish it’s been since the start of 2022.
Tin is a relatively small LME contract and the scale of speculative inflows injects extra unpredictability into an already volatile market.
That underlying volatility is only going to get worse as the number of potential supply threats multiplies.
(The opinions expressed here are those of the author, Andy Home, a columnist for Reuters.)
(Editing by Paul Simao)
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