Tin demand outpacing supply

In 2004, tin performed the best of the six base metals traded on the London Metal Exchange. Prices increased by almost 150% between August 2002 and May 2004, according to a report by London-based Roskill.

Tin’s market strength is underpinned by increasing demand, stagnant supply, and low inventories. The market is expected to be in deficit until at least 2006, with a shortfall of around 15,000 tonnes in 2004. Projects in Australia, Brazil, Egypt, Argentina, Russia and the U.K. could add 25,000 tonnes to mine supply over the next five years, with the first new production coming on-stream by the end of 2004. Tin consumption exceeded 300,000 tonnes for the first time in 2003, and is expected to be around 330,000 tonnes in 2004.

Demand is expected to increase in all end-use sectors over the next five years, but the fastest growth rates will be in solder and chemicals, with an overall rate of 3.5% annually and resulting in a market of 365,000 tonnes per year in 2008. Chemical applications now provide a larger market than tinplate, which was once the major end-use before declining in the 1970s and 1980s, as a result of its decreasing use in beverage canning. The fundamentals of the tin market point to continued strength well into 2006, with the price remaining between US$8,000 and US$9,500 per tonne. There is, however, an argument for considerably higher prices, should world economies continue to grow at or about the rates seen in 2004 and tin supply struggles to keep pace.

Highlights

China, Indonesia and Peru are by far the largest tin mining and refining countries, together accounting for 80% of tin mine production and 72% of refined tin production in 2003. Timah and Koba Tin are the two major companies in Indonesia, while all production in Peru is from the Minsur operation. Tin mining in China comprises thousands of small non-mechanized mines and a few more modern larger operations, including Yunnan Tin.

The long period of low tin prices resulted in prolonged under-investment and a decline in the tin mining industries of Malaysia and Thailand, though they both still have large tin refining capacity, and Malaysia has access to some of the largest known resources of tin. Malaysia Smelting, in Malaysia, and Thaisarco, in Thailand, operate large tin smelters and refineries that depend principally on imported concentrates. Unofficial exports from Indonesia used to keep them supplied, but these have dried up since 2002. Malaysia Smelting has started to acquire interests in Australian and Indonesian tin mining companies.

Unlike other base metals, it is difficult to predict how the tin supply is going to respond to the higher prices because so much production is dependent on small, artisanal miners, mainly in Indonesia and China. Chinese production is growing, but the increased output is being absorbed by domestic demand.

The use of tin in solder has increased rapidly in recent years, particularly in China, with the boom in consumer electrical appliances and electronics. Demand for tin has been greatly enhanced by the move to lead-free solders, backed up by legislation in Europe, Japan and China. Solders that typically contain about 63% tin are being replaced chiefly with solders containing more than 95% tin, creating a 35% increase in tin demand for the same task.

— The preceding is from an information bulletin published by Roskill Information Services.