Fri, 29 Nov 17:13:00 GMT
* Electronics industry due to rebound
* Solder, mainly in electronics, is half of tin use
* ITRI survey shows demand recovery in all applications
By Eric Onstad
LONDON, Nov 29 (Reuters) - A deficit in the global tin market is expected to deepen in 2014 to 12,400 tonnes from 7,400 tonnes this year largely due to increased demand from a recovering electronics sector, industry group ITRI said on Friday.
This should lead prices to recover to an estimated average of $26,000 per tonne next year compared to $22,869 on Friday, Peter Kettle, manager of markets for the group, told an ITRI conference.
ITRI has been carrying out a survey among companies about their use of tin. The latest results, although not complete, are showing strong increases.
"If we look at the situation over the last year or so, the electronics business has been pretty sluggish," Kettle said.
Solder, mainly used in the consumer electronics industry, accounts for about half of global use of tin.
"I think there's evidence now that things are turning around. This is happening both across most of the major regional markets in the world and in terms of all the end-use markets."
Kettle cautioned that the ITRI end-use survey was unweighted and not complete, but it was indicating significant upswings for all applications.
At the same time, supply from top producer Indonesia has been volatile since it forced all exports to trade via the Indonesia Commodity and Derivatives Exchange (ICDX) in a bid to shut down illegal mining and shore up prices.
During the first half of the year, the market was in surplus as Indonesia destocked and demand was weak, but the situation has reversed.
"The combination of the slightly tighter control of Indonesia and improvement in consumption means that we moved back into deficit, and in fact we will probably will have five years in a row where demand exceeds supply," Kettle said.
NO NEW MINES
No new mines are expected to come on stream next year, and most new projects are in early stages and will take 10-12 years before starting production, he added.
"There's next to nothing for the next couple of years. Potentially there's a lot of new production over the next decade, but it certainly needs the right market conditions."
With capital costs for new projects at an average of about $30,000 per tonne, prices will have to rise to make new mines viable.
Tin has been the best performer of the six base metals traded on the London Metal Exchange this year, with benchmark three-month prices down only 2.7 percent compared with a 20 percent fall for the worst performer, nickel.
Prices are expected to rise to $30,000 to $40,000 a tonne within three to four years due to supply shortfalls, Kettle said.
Financing has been difficult for small companies developing tin deposits, executives told the conference.
An executive of Tin International, a private company working on projects in eastern Germany, said it had to look for a smaller deposit because it could secure only 25 million to 30 million euros ($34.0-$40.85 million) of financing.
Managing Director Wayne Bramwell of Kasbah Resources , which is developing mines in Morocco, said companies had to be creative and seek alternative financing, including private equity and offtake deals.
"It has taken us seven years and 70 million Australian dollars ($63.7 million) to get from early exploration to the point where we can take this to a bank for finance. Today it would take a hell of a lot longer," he said.
($1 = 0.7345 euros)
($1 = 1.0998 Australian dollars)
(editing by Jane Baird)
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