SMM Morning Review – 2011/10/25 Tin Market

SHANGHAI, Oct. 25 (SMM) -- LME tin prices opened at USD 21,800/mt and closed at USD 22,329/mt overnight, up USD 709/mt from a day earlier, with the highest price at USD 22,499/mt and the lowest price at USD 21,800/mt. Daily trading volumes were 241 lots, up 59 lots. Positions were 17,041 lots, down 200 lots. LME tin inventories were 16,985 mt, down 515 mt from a day earlier.

LME tin prices fluctuated higher overnight. During the Asian trading hours, LME tin prices extended last Friday's upward momentum, as HSBC’s China initial PMI hit a 5-month high in October. During the European trading hours, inspired by progress in solving the European debt crisis and growth in industrial orders for August in the Euro zone, market sentiment was boosted. Finally, LME tin prices closed at USD 22,329/mt, up USD 709/mt from a day earlier.

HSBC’s China initial PMI was 51.1 in October, the highest in five months, with manufacturing output index and Enterprise procurement index both advancing. Sunday’s EU summit failed to reach agreement on a package of aid plan to solve the European crisis, but the leaders from the European Union reached a consensus on recapitalization of banks and on how to make best use of rescue fund. Meanwhile, consensus also reached on granting Euro 8 billion bailout fund to Greece. Moreover, investors were optimistic towards outcome of the summit to be held on October 26th.

Investors’ confidence was boosted due to positive economic data from China and short term hope for the European debt crisis, leading momentum for metal prices to rebound. However, fundamentals of base metal will not support base metal prices to maintain sustainable growth.  LME tin prices broke through USD 22,000/mt after rallying for two consecutive days on positive news, but still face downward risks. Market sentiment has not stabilized, and SMM expects that LME tin prices will continue to test sustainability at USD 22,000/mt, with resistance felt at USD 23,000/mt on Monday. In China’s domestic spot market, spot tin prices may advance slightly on Monday, due to bullish market sentiment and relatively tight supply of spot tin.