Reviewing the course of the past few months, tin market this year's bull market started in the Spring Festival before the outer disk very deformed spot high premium water. During the Spring Festival, the LME spot price was up to an astonishing $7,000 over the March futures price. At that time, the overseas market was experiencing a situation of hard to find goods. The epidemic situation made the main producer of tin in South America in a state of production reduction and transportation blockade, and the international shipping capacity was tight, which also led to the spot tin ingot could not reach the consumer enterprises in time.
From this, opened a long - drawn-out price long red trend. Affected by the high price overseas, after the Spring Festival, the domestic tin price rose all the way, quickly broke through the 170,000 yuan/ton mark. However, relative to the LME price, the domestic price is still low, resulting in a large number of domestic tin ingot exports. From January to August, China's tin ingot exports exceeded 10,000 tons, mainly concentrated in the second quarter. This has also led to a rapid decline in inventories in the domestic market. During this period, benefiting from the impact of monetary easing in the macro aspect and driven by strong demand, tin prices at home and abroad have been in the general trend of rising, rising more or falling less, constantly breaking new highs, standing at a high of 200,000 yuan/ton in June, LME price also rose to more than 30,000 DOLLARS.
But the rally did not stop there, as a number of domestic smelters shut down due to power rationing and yunnan Tin Corp. 's month-long shutdown for maintenance from the end of June led to further supply shortages and a new, more violent rally. In just 3 months, the price rose by nearly 80,000 yuan/ton, making the market stunned!
The sharp rise in tin prices this year seems to be the result of a pandemic and shutdowns caused by power rationing, but in the long run it is also a reflection of years of declining supply, low investment in new mines and rising consumption. The tin mine production in Myanmar has been in an irreversible decline since 2018, and the epidemic has made the local production even worse since 2020. Although the price has reached about 280,000 yuan now, the production here has been maintained at about 2500-3000 tons/month due to the lack of workers. That's a big gap from the peak of 6,000 tons per month. For now, the wa government's selling of concentrate stocks has relieved some of the pressure on concentrate supply, and exports are expected to continue at around 4,000-4,500 tonnes per month until the end of the year, but it is hard to see a bigger increase from last year's supply. The resumption of production in Inner Mongolia's Yinman Mining has also increased the supply of some domestic mines, while the high price has also spurred the increase of some domestic low-grade mines. However, because of the continuous high price of spot water, smelters are facing a difficult choice in operation. On the one hand, it is safer to choose hedging under the high price. On the other hand, the processing fee does not increase simultaneously, and the smelting profit is low, which cannot cover the difference between spot and futures. So high prices have not encouraged smelters to ramp up production. However, with high tin prices and smelter fees beginning to adjust, mines are gradually transferring some of their profits to smelters, and tin ingot production may increase in the coming months.
Other countries in the world also have a certain increase in mine production, but mostly manual mines, small-scale mines. A half-year shutdown of smelters in Malaysia has also strained the supply of overseas tin ingots. Due to limited overseas smelting capacity, other smelters were unable to process excess concentrate after the Malaysian smelter shut down. However, the Malaysian smelter has recently returned 80% of its workers to work and production may gradually increase. However, the accumulation of inventory still needs a period of time, the short-term market is difficult to see improvement.
In addition, from the perspective of consumption, the high tin price caused some demand suppression, tin chemical industry may be the most obvious, a number of chemical plants have reported varying degrees of production reduction. However, the demand for 5G and pv is still hot. We may need to consider whether the new consumption of tin in the future will lead tin into a new era of upgrading.
The tin price myth in 2021 is not the result of a single day, but the reflection of the contradiction between supply and demand and macro policies over the past years. What happens next will depend more on whether demand can sustain such a high price and whether increased demand from new areas can replace reduced demand from old ones. Whatever the macro changes, a new tin price era has arrived. 2021 will be a year of thick color and heavy ink in the history of the tin industry.
