SHFE Tin Saw a Sharp Rise Then a Sharp Fall: Is the Computing Power Metal Concept Losing Its Appeal? [Wenhua Observation]

SHFE tin opened the week with a rally in full swing, pushing prices to within striking distance of an all-time high, primarily driven by supply-side disruptions and the computing power theme. In the last two days, however, the market suddenly reversed course, with prices pulling back sharply in a broad decline that completely erased the week’s earlier gains. What changed in the market’s trading logic?

Rise and Fall on the Same Catalyst: Semiconductor Stocks Pull Back

As the iteration of large AI models advances and high-end computing power chips are upgraded, the amount of solder required in their production increases. This year, tin’s label as a computing-power metal has continued to strengthen. Amid the AI frenzy, semiconductor indices outside China maintained a sustained rally, which not only boosted demand expectations for tin but also significantly benefited tin prices through the stock-futures linkage effect. However, heights breed danger. After a parabolic surge, chip stocks repeatedly hit new highs. The Philadelphia Semiconductor Index components recently traded at 26 times forward 12-month earnings, well above the 10-year average of 21 times. The AI space became increasingly crowded, and market disagreement grew over the rally’s sustainability. Going forward, whether AI demand effectively spreads and the earnings performance of chip leaders have become the market’s center of focus.

The newly released revenue of chipmaker Broadcom missed expectations, cooling the AI fervour to some extent. Overnight, chip stocks suffered a collective sell-off, and today the South Korean stock market plunged, with Samsung Electronics and SK Hynix falling sharply. Against the backdrop of a significant pullback in semiconductor stocks, tin prices were inevitably dragged down, leading the decline in China’s commodity futures market today. The market is now assessing whether AI infrastructure investment has already overdrawn future growth expectations, though some investors remain optimistic. Yesterday, the US Nasdaq index opened lower but rebounded to largely recoup its losses by the close. The overall market style displayed a rotation of funds rather than a mass exodus, making it difficult to argue that the bullish expectations for future semiconductor stocks have completely dissipated.

Overseas Central Bank Policy Expectations Turn Hawkish, Liquidity Concerns Intensify

Recent US-Iran negotiations have seen repeated developments, but judging by the overall trend in precious and base metals, the market largely ignored the short-term headline noise. The overall trend remained under pressure, mainly weighed down by liquidity concerns. Market expectations for the timing of potential interest rate hikes by European and US central banks are being pulled forward, with multiple factors reinforcing this view.

On one hand, US economic data showed resilience. The US ISM Manufacturing PMI rose to 54 in May, a near four-year high and the fifth consecutive month in expansion territory. Some employment data showed improvement, and the labour market maintained its characteristic of "low hiring, low layoffs," providing ample justification for a policy shift. On the other hand, US inflationary pressures are evident. Both the PCE price index and the US Fed’s Beige Book indicated that cooling consumption and rising price pressures have emerged simultaneously across multiple sectors. Uptick in inflation is tightening the outlook for monetary policy. In addition, the overall stance of US Fed officials has turned hawkish. The minutes from the April Federal Reserve meeting showed that the internal assessment has shifted, from previously expecting interest rate cuts later in the year to a greater inclination to maintain current rate levels for an extended period, and even not ruling out a further increase in borrowing costs. Recently, several officials also released hiking signals, stating that if inflation remains persistently high, the possibility of further policy tightening cannot be ruled out.

Fundamentals Have Not Shifted, Supply-Side Support Remains

Overall, the sharp pullback in SHFE tin over the latest two days was mainly dragged down by liquidity risk and a cooling of the AI frenzy. Tin prices have always exhibited high elasticity. Currently, the futures price has only given back the gains of the preceding two days, with the center not yet moving further downward, which indirectly reflects that support from the tin market’s supply-demand structure still exists.

Currently, traditional demand-side tracks remain subdued, while the emerging computing power engine remains robust. Marginal growth keeps demand expectations for the tin market bullish, while ongoing supply-side disruptions bring more upward momentum. Recently, key producing regions including Myanmar, the DRC, and Indonesia have all seen varying degrees of disturbance. Specifically, supply recovery in Myanmar has been slow, hampered by operational restrictions, material approvals, and accidents. The Goma border crossing in the DRC was previously closed due to an Ebola outbreak, raising market concerns about supply disruptions. Indonesia’s export policy outlook carries high uncertainty, with the overall policy direction showing a persistently tightening trend, reflecting deeper resource nationalism and the bottleneck of tin ore flows against the backdrop of resource de-globalization.

In summary, current inflationary pressures are intensifying, and interest rate hikes by European and US central banks seem to be on the verge of deployment, making it difficult to expect any easing in liquidity. Commodity trends will remain under pressure. However, the computing power theme is unlikely to fizzle out, and mine-side supply growth is limited, which may restrict near-term downside space. The market retains a bullish outlook for SHFE tin over the medium and long term.

(Wenhua, Synthesized)