SMM Analysis on What Caused Slump in SHFE Tin Prices

SHANGHAI, May 10 (SMM) – SHFE tin fell sharply across the board over the past two days, with the most-traded 2206 contract losing nearly 7% at the close of Monday’s night session. SMM believes the following factors have contributed to the decline in tin prices.

First of all, the import volume of tin ore and refined tin increased significantly in the first quarter. The import volume of tin ore and refined tin was at a historical high level, and the TCs of domestic tin smelters gradually increased.

Secondly, overseas consumption has weakened, and LME tin inventories have risen to the highest level since 2021.

Thirdly, downstream enterprises in east China have been affected by the pandemic.

 Another reason is that the US Fed's policy of raising interest rates and shrinking its balance sheet will put pressure on non-ferrous metal prices.

China’s tin ore import volume in the first quarter was 88,730 mt, an increase of 113% year-on-year; the refined tin imports changed from a net export of 9,426 mt last year to a net import of 248 mt in the first quarter, showing that overseas tin consumption is gradually weakening. The domestic tin ore output remained stable. The average monthly output in the first quarter was 5,801.5 mt, a decrease of about 7.28% from last year. However, the TCs of smelters gradually increased. Taking the TCs of 40% concentrate in Yunnan as an example, which rose to about 25,000-27,000 yuan/mt, showing that the tightness of tin ore supply is marginally relieved. According to SMM survey, there was about 2,500 mt of imported tin in the market in April, and it is expected that the subsequent import volume of tin ore will also maintain a positive growth. Overseas refined tin consumption has weakened this year, and the LME tin inventory has reached 3,120 mt after nearly three months of accumulation, the highest level since 2021. The SHFE/LME tin price ratio has gradually increased since March, and the import profit of refined tin has increased accordingly. Although import profit has fallen recently, it still maintains a level between 6,500-15,000 yuan/mt. High import profits will also make imported refined tin continue to flow into the domestic market.

The overall operating rate performance of domestic downstream solder factories was still relatively strong. In April, the average operating rate of solder enterprises was 87.6%, an increase of 5 percentage points when compared with March. The average operating rate this year was 79.55%, versus 76% last year.

However, the production and transportation of solder enterprises in east China were affected by pandemic, with output down 14.47% MoM in April.