Like the momentum of the to rally Among this year’s base metals, one has continued to outperform. Their prices have increased by 20% so far this year. despite weak global manufacturing activitydue to a confluence of factors. Supply has been struggling and remains close to 2005 levels. On the demand side, the energy transition, with its reliance on green technologies, is boosting consumption. The rebound in semiconductor sales has also provided support. We are talking about tin, which Prices rise to $30,000 per ton after breaking through to 35,000 this summer and the momentum seems to continue: strategists like those at Bank of America (BofA) place it at an average price of $37,000 by 2026.
Looking more closely at the famous supply problem, tin production has remained virtually stable, around 300,000 tonnes per year, for almost two decades. The supply problems became evident in the first half of 2024, when Tin concentrate production fell 9% year-on-yearreaching an annualized figure of 268,000 tonnes.
“As demand has increased, tin prices have seen multiple increases in recent years, also due to persistent supply shortages. Data show that refined tin production at the top 10 producers has been falling for years. Last year, only half of the operators reached last year. Can’t refined metal production evolve independently of mine supply, which in the case of tin was about 300,000 tonnes last year, less than the global industry produced in 2005. “This year, tin concentrate production has again underperformed expectations,” analysts from BofA’s commodities team explain in a report.
Strategists emphasize two major global suppliers tin, Myanmar and Indonesia. First, in Myanmar’s Wa State, historically China’s largest supplier and the world’s largest consumer of tin, mining has remained suspended following a ban introduced in August 2023. Shipments to China remained stable in the first quarter of the year, helped by the tin ban’s ore reserves available in Wa, but dwindling stocks have since caused shipments to fall 45% year-on-year.
In June, the transport of remaining tin concentrates from the Wa autonomous region resumed in response to economic pressure from the Wa State Bureau of Mines and Industry. According to analyst firm CRU, the tin content of unsold stocks is estimated at just over 2,000 tonnes (about 15% of average monthly shipments to China). The timing of the end of the mining ban remains highly uncertain, so supply from alternative countries is essential to ease the strains in the Chinese market.
Exports from Indonesia, the world’s second-largest tin producer (it produced just over 20% of the world’s refined tin last year and was the largest exporter), have also fallen this year. Delays in granting mining licenses are largely to blame. Some producers have started to receive approved work plans and budgets (RKABs) to operate in the country and export licenses, suggesting that exports are set to pick up. “But it’s not all cake,” BofA warns. “The government has also increased scrutiny of allegations of historical corruption in the tin trade, which has had an even greater impact on the industry. In addition, there is a risk of potential export restrictions due to the decision by Indonesia’s Ministry of Energy and Resources (ESDM) to classify tin as critical because of its importance to economic growth and the global energy transition.”
What happened to these two “giants” overshadows the atypical rebound in tin production in Peruwhich rose 69% year-on-year in the first half after political unrest severely impacted operations in early 2023. “Minsur, the country’s largest operator and the world’s second largest, is increasing production this year, targeting 30,700-35,800 tonnes of refined tin output from 30,715 in 2023. But that is not enough to offset weaknesses elsewhere,” the US bank’s experts warn.
Another problem that shows production difficulties is the inflationary pressureswhich are noticeable in the costs. In fact, the marginal costs They rose 19% to around $23,000 per tonne between 2020 and 2022, providing a solid floor for prices. The International Tin Association (ITA) expects costs to rise further by the end of the decade, potentially exceeding $35,000 per tonne.
A few projectswho aspire to produce in 2027they point out from BofA, They need prices close to or above $40,000 per tonne to be profitable. Sustained price increases are therefore needed to encourage new supply, also taking into account the long lead times between initial discovery and first production. In the tin industry, the duration can exceed 10 years. Currently, only a handful of projects have reached the definitive feasibility study (DFS) stage, suggesting that the project pipeline is likely to remain tight in the future.
These serious supply-side problems contrast with a huge demand. After a weak 2023, sales of chips have rebounded 17% year-over-year so far, supporting demand for tin. Alongside this, and given that tin prices have historically tracked growth in the technology sector, the metal is also expected to benefit from the growing popularity of artificial intelligence (AI). “We believe this rebound is likely to continue. After all, lower inflation and lower interest rates should support consumption and demand for commodities. consumer electronics. Additionally, global semiconductor trade statistics predict a solid recovery of 13.1% this year, following an 8.2% decline in global semiconductor sales in 2023,” says Kieran Tompkins, commodities strategist at Capital Economics.
THE ecological transition also supports tin consumption: according to the ITA, the use of tin in solar industry has grown more than six-fold over the past decade to become the third largest end-use sector in China, accounting for 10% of the country’s demand. The growing popularity of electric vehicles It is also a support, since they require 2 to 3 times more tin than thermal engine vehicles.
In solar PV, the ribbon that connects individual solar cells and carries the charge to junction boxes can be made of tinned copper wire. Beyond the panels, tin is also crucial to the solar infrastructure itself, as the metal is a key ingredient in soldered connections. Another ITA analysis recently noted that tin use in solar PV has more than tripled in five years, to 35,000 tons, and is expected to exceed 40,000 tons by 2030. That’s about a tenth of global consumption, they point out at BofA.
Recovery despite sector weakness
Supply issues and this bright outlook are helping tin to break away from prices that would justify the current little global manufacturing activitywas a major reason why the second-quarter rally in base metals faded. Tin prices remained 35% above levels that traditional relationships would imply, according to BofA calculations.
As for the stocksThe bullish fundamental backdrop has also been reflected in tin outflows from global warehouses. In fact, after rising last year due to slowing semiconductor sales and tight monetary conditions, inventories have fallen again this year. London Metal Exchange (LME) stocks have fallen to half their level at the start of the year and now stand at just 4,625 tonnes. Similarly, Chinese inventories have declined since June as tin shipments from major suppliers have come under threat.
Of course, the favourable backdrop has also made tin attractive to investors. While investment firms/credit institutions and commercial entities continue to account for the majority of trading activity on the LME, speculative activity has increased This year, they are certified by the American bank. In fact, the share of investment funds in total trading volume has increased to 12%, compared to only 5% in 2023, and net long positions reached their highest level ever in July.
Is there threat on this resplendent scene? There is. “The Growing trade tensions between the United States and China They pose a risk to semiconductor supply chains as China has imposed export restrictions on key materials used in chipmaking, such as gallium and germanium. Raw materials continue to flow, but some Western consumers are warning of potential shortages if raw material shipments continue to decline. “So a tech war would be negative for tin,” they warn at BofA, recalling, in any case, that this is not their base case and that they expect tin demand to grow 4.9% this year, and continue to grow 3.5% in 2025.
