Refined tin cash prices on London Metal Exchange (LME) may average at $26,000/t in 2014 due to enlarged deficit, stated London based Barclays in its recent market analysis.
This effective tightening in fundamentals is predicated around a constrained outlook for mine production growth and moderate demand pick-up.
Indonesia continues to suffer from a decline in ore grades and reserves, as well as rising cost trends at alluvial operations, which would limit output growth, alongside regulatory constraints. In addition, there is also a lack of new significant tin projects ramping up in the near term.
Whilst tin has received much positive attention given it remains the only base metal facing a projected market deficit in 2013, the realities of fundamental conditions seen so far this year
have done little to bolster belief in that forecast.
Robust Indonesian exports, weakening Chinese refined imports and rising LME stock levels have characterised the first quarter of 2013 and provide clear evidence of a surplus in the refined market ex-China. In-line with ITRI adjustments, Barclays has reduced its expected deficit projection to 3Kt for 2013 from 7Kt previously (to account for a 4Kt surplus in Q1).
“We continue to believe, however, that market conditions will tighten over the course of the year. In terms of China, the current contraction in both refined imports and domestic production are indicative of a destocking cycle necessitated by an estimated 18Kt domestic stock build in 2012,” Barclays forecasts.
Barclays anticipates a general improvement in end-demand in Q2, which would accelerate this destocking effect, and in turn points to a tighter and more import-supportive domestic market balance developing in H2 this year. In terms of Indonesia, Barclays also expects that, export shipments to be more constrained from July following the tightening of controls on refined tin quality imposed by the country’s trade ministry.
On the demand side, the bank expects a modest improvement in global GDP growth levels to support an up-tick in demand in 2014, albeit still below 2010-11 levels.
In that respect, soldering tin use has suffered from the structural constraints of miniaturisation and circuit board developments over the past few years, which has contributed to a lower intensity of use in electronics.
This was reinforced in 2012 by the cyclical weakness caused by the end of the rural domestic appliance sale incentive scheme in China.
The bank forecasts that, global electronics sector conditions to improve into next year and support the highest level of demand growth for tin since 2010.
A continued recovery in global electronics production, combined with growth in demand from new uses in sectors such as chemicals or lithium ion batteries, should support this outlook.
