Andy Home: Investors are still betting on scarcity despite the rebalancing of ROI-Tin

What can tame a wild tin industry?

The London Metal Exchange's (LME) smallest base metal contract continues to defy the market.

LME 3-month tin trades?at $55,225 a metric ton. This is close to the previous all-time record of $59,040, which was reached during the febrile cross-metals rally that took place in January.

In March 2022 metal prices rose in response to Russia's invasion of Ukraine.

London's tin prices are up 36% from the beginning of the year. Aluminium is the next best performer, with a rise of 23%. It is also experiencing a supply shock due to the Iran War.

Tin supplies, on the other hand, are stable compared to previous years. LME stocks are increasing. LME's time-spreads indicate that there is no shortage.

How is it that the price of soldering and packaging material remains so high?

REBALANCING

Tin, unlike aluminum, nickel, and copper, has not been directly affected by the Gulf War.

According to the International Tin Association, global mine production will grow by a healthy 8,7% this year.

After a long absence, the Man Maw Mine in Myanmar is slowly returning to life. The Bisie mine, in the Democratic republic of the Congo, is now stable following a brief shutdown last year due to insurgents encroaching on the area.

China's imports tin concentrats have exceeded 15,000 tonnes per month for first time since 2023.

Huanbo Quin, ITA's market analyst, said that the refined production will take time to catch up, as global growth is projected to be 2.7% in this year.

The consumption is expected to drop by 0.7% due to a slower pace of solar installations in China, as well as the impact the Iran war has had on the consumer's appetite for electronic products and the historically high prices.

The fundamental landscape of the market is moving towards a balance between supply and demand. The progress is evident in the rising exchange inventories. LME stock levels have increased by 60% to 8,660 tonnes since the start of the year.

Global exchange stocks, including LME off-warrants and Shanghai Futures Exchange inventory (ShFE), are now close to 20,000 tonnes, up from 11,000 tons in October.

Comparing the LME time-spreads to the volatile outright prices, they are currently trading in a comfortable contango.

The Scawny Meme

Investors, especially those in Shanghai, who are looking for a price increase have not been deterred.

The metals fever of January has subsided, but not yet broken. ShFE's tin market activity is still booming.

So far in this month, the daily volume of the Shanghai tin contract has averaged 345 000 contracts. This is the equivalent to the primary refined tin markets being traded daily.

Tin options have exploded, with volumes increasing by more than twofold year-on-year from January to April.

Funds have reduced their bullish bets but are still collectively long 2,414 contracts or just over 12,000 tonnes.

Early last year, the bullish news about tin was "coming thick and fast".

Along with silver and cobalt, tin has been included in the "internet-metals" investment meme.

In the case of tin, its use in circuit-board solder is a key factor in hardwiring the internet. Demand is driven by robotics, artificial intelligent and the internet.

All three are facing structural supply issues. Silver will have a deficit for the sixth year in a row. The copper industry is battling a rolling raw material?crunch, as mines struggle with scaling up production in order to meet the smelter's demand.

Tin supply is highly concentrated in frontier mining areas such as the Congo, and semi-autonomous Wa State which operates the Man Maw Mine in Myanmar.

Even though there are no immediate signs of a shortage, all three metals have been priced to reflect future structural scarcity.

Tin's current price is a testament to the fact that you cannot keep a good investment meme down, even if market dynamics are short-term and contradictory.

While this is true, it is difficult to understand what "pulls" tin to the mundane reality that supply and demand.

Andy Home is a columnist at. This column is great! Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.

(source: Reuters)