Consumer belt tightening drives down brazing metal tin demand

A worker solders electrical wire to a part on the factory floor of PP Control and Automation near Cannock, UK, July 6, 2016. REUTERS/Phil Noble

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  • Illiquid tin market exaggerates price decline
  • Chinese smelters cut production

LONDON, July 5 (Reuters) – Concerns over the recession and consumer belt tightening have hit demand for electronic goods, leading to lower consumption of solder metal tin, but reduced production is likely to bring the market into equilibrium this year.

Expectations of large shortages had pushed tin to a record $51,000 per tonne in March, but since then China’s COVID-19 lockdowns, rising inflation and higher interest rates have roughly halved prices to 15-month lows.

LME can price and open interest

Part of the problem was that funds cut their bets on higher prices in an illiquid LME market, exaggerating losses, as seen in open interest on the London Metal Exchange (LME) at 61,205 tons, against 75,885 tons at 3 March.

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Tin consumption

Declining consumer demand can be seen at Samsung Electronics in South Korea (005930.KS)which according to reports has temporary new orders were halted and suppliers requested to delay or reduce parts shipments for several weeks due to high inventories.

Falling semiconductor exports from South Korea later this year are also expected to weigh on tin demand and prices.

“Tin has been an example of the boom we’ve had in consumer electronics over the past two and a half years… To keep tin down, people will have to cut (sell) tin,” said Macquarie analyst Marcus Garvey.

Macquarie expects a demand for tin of 377,000 tons this year and a small shortage of 5,000 tons.

“We’re seeing a winding down of the global inventory cycle and this is hurting metals in general, tin is an extreme case of that,” Garvey said.

Tin market balance

On the supply side, China’s tin smelters reduce production or bring to the fore care and maintenance.

A survey of 17 Chinese smelters found that production in China will decline significantly from mid- to late June, according to the International Tin Association (ITA).

“Some producers are stepping down because they bought concentrate at higher prices. They would lose money selling tin at current prices, said ITA analyst James Willoughby, adding that the tin market probably saw a surplus in the second quarter.

Surpluses can be seen in the stocks in LME warehouses of 3,560 tons, an increase of 85% since the beginning of April.

Weaker demand is seen in lower premiums consumers pay above the LME benchmark price to buy spot tin, which has fallen to $2,000 per ton in the United States from nearly $4,000 in August last year.

LME can stocks
Tin premiums in the physical market
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Reporting by Pratima Desai; edit by David Evans

Our standards: The Thomson Reuters Trust Principles.

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