Tin Prices Seen Extending Climb as Global Shortages to Last

Bloomberg) -- Tin, which has surged more than 40 percent this year, is set to keep advancing amid continued shortages because supply is not coming on fast enough, according to Peter Kettle, chief analyst at research group ITRI Ltd.

Prices may rise to about $30,000 a metric ton in 2018-2019, Kettle said at an industry conference in Shanghai, an increase of 42 percent from the level now. The market will have a deficit of 10,000 tons to 15,000 tons this year and a similar shortfall in 2017, he said on Tuesday. Tin is among the top picks for researcher CRU Group next year, said Susan Gao, head of consulting in China.

Tin, used for soldering in electronics, has gained to the highest level in more than two years, and is the best performer after zinc on the London Metal Exchange in 2016. Top shipper Indonesia has curbed exports and inventories in sheds tracked by the LME have slumped to the lowest since 2004. Tin and zinc are “the standout stories in terms of structural supply constraints capable of tightening the market,” Standard Chartered Plc said last month.

“We’re in a very long-term trend of declining stockpiles,” Kettle said. “If stocks fall much further, we will get to a critical point that prices could go much higher than the medium-term equilibrium” of about $22,500 a ton, he said. ITRI is a U.K.-based company which supports the industry and helps to expand the metal’s use. The group is backed by producers and smelters.

Shipments by Indonesia, the world’s largest exporter, plunged to 52,617 tons in the first 10 months of this year, the lowest for the period in at least a decade, from 61,713 tons a year earlier, Trade Ministry data show. Global supply trailed demand by 20,500 tons in the first eight months of 2016, according to data from the World Bureau of Metal Statistics. LME-tracked stockpiles have fallen by more than half since May.

Refined output in the country may drop to about 60,000 tons this year, Jabin Sufianto, head of the Association of Indonesia Tin Exporters, said in September. That compares with 67,350 tons in 2015 and would be the lowest since 2002, according to WBMS data. Kettle said on Tuesday that Indonesian supply will be about 60,000 tons in the medium term.

While Indonesia’s production has been hurt by rains and mining regulations, it could be 60,000 tons to 70,000 tons this year and may rise slightly in 2017 if the weather improves, Riza Pahlevi Tabrani, president director of top producer PT Timah, said in an interview. Timah’s shares have more than doubled in 2016 and reached the highest in two years this month.

Prices above $22,500 are needed in the medium term to spur the supply required to balance moderate growth in demand, said Tom Mulqueen, an ITRI analyst. While Bolivian production is set to rise, output in China, Indonesia and Peru is faltering, he said. Tin for delivery in three months time added 1.2 percent to $21,100 on the LME by 10:48 a.m. in London on Tuesday.

Along with tin, Gao from CRU said at the conference that crude oil, nickel and zinc were also among her top choices for next year and that commodity prices overall were poised to rise further.

(Updates to add comment in penultimate paragraph.)

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