Tin shortage drives up prices
By John Miller, Editor
A shortage of tin has helped drive the biggest rally among base metals in 2010 and sparked new interest in tin exploration around the world.Exacerbating the shortage, heavy rain in Indonesia is likely to cut shipments from the world’s biggest tin exporter by up to 20% this year.Inventories of tin in London Metal Exchange warehouses are almost 50% lower than in 2009 and the global deficit may be 17,000 tonnes this year compared with a surplus last year.The heavy rain, particularly in the Bangka-Belitung province that accounts for most of Indonesia’s tin production, has seen less tin mined and exported, which has also impacted on global stockpiles.The rain has been linked to a La Nina weather event, which weather experts say is likely to persist until early 2011.Indonesia’s secretary to the Director-General of Minerals, Coal and Geothermal at the Energy Ministry, Witora Soelarno, says that the country’s tin output may drop about 20% this year to about 75,000 or 80,000 tonnes.Reflecting his statement, tin shipments from Indonesia in the first seven months of 2010 fell by 12% from 2009 to 52,133 tonnes. Refined tin sales from Indonesia’s largest producer, PT Timah, fell by 18% in the first six months of 2010.While production and sales have decreased, PT Timah will be benefiting from subsequent price increases.Tin has advanced about 40% in London this year, beating the 27% increase of second-placed nickel. The contract, which reached a record $25,500 a tonne in May 2008 and then dropped coinciding with the global financial crisis, peaked at $23,800 on September 17 and remains strong.With tin being the smallest and least liquid of the base metals, in terms of the size of the market, it is generally ignored by the speculative community and by the main thrust of fund money. Consequently, much of its strength is due to its underlying fundamentals and demand from China.Looking ahead there seems little to stand in the way of the current price strength. Should Chinese demand continue to remain strong and Chinese participants return to the market in size either later this year, or in early 2011, then prices may yet head higher still.Tin is used in packaging and solder, with the latter accounting for strong global demand as tin is the preferred resource component.