Metals News
Forecast tin deficit unlikely to materialise in 2014-industry group
industry news
Aug 20,2014

Tue, 19 Aug 10:20:00 GMT

* ITRI had forecast market deficit of about 10,000 T for 2014
* Demand for solder from key electronic sector has been weak
* Indonesian export controls from Nov could spark rally

(Adds details, quotes, background)

By Eric Onstad

LONDON, Aug 19 (Reuters) - A forecast tin deficit is unlikely to materialise this year after increased output coincided with weak demand from the key electronics sector, industry group ITRI said on Tuesday.

Prices are expected to be trapped in their recent range until the end of the year, after which stricter export controls in top producer Indonesia may help to spark a rally, said Peter Kettle, markets manager at ITRI.

Benchmark tin on the London Metal Exchange has shed about 6 percent since touching its highest level of the year in April - at almost $24,000 a tonne - and was down 0.1 percent at $22,410 on Tuesday morning.

Many analysts have been forecasting a market deficit this year that was expected to support prices.

"Until recently we were forecasting a deficit in the order of 10,000 tonnes this year, but the latest indications are that second-quarter production in both Indonesia and China was considerably higher than expected," Kettle told the Reuters Global Base Metals Forum.

"In addition, the electronics industry has been very sluggish in the first half of the year. So the forecast deficit has pretty much disappeared."

Solder used in electronics is the most important consumer of tin, accounting for about half of global use of the metal.

ITRI expects 2 percent growth in world tin consumption this year, slightly down from last year, Kettle said.

"The electronics industry finished 2013 strongly, but sales have been quite flat in the first half of 2014. However production has been picking up, especially in China," he said.


Since early this month LME tin prices have been largely trading between $22,300 and $22,500 a tonne. Kettle said they are likely to remain stuck in their recent narrow range for at least a couple of months.

"However, a combination of tighter controls on Indonesian exports from November 1 and a bit of a pick-up in electronics could stimulate a price rally near the end of the year," he added, giving no specific price levels.

Under the new Indonesian regulations, it will be more difficult to export products other than 99.9 percent tin ingots, while recently between 20 percent and 40 percent of sales have been in other forms, Kettle said.

Previously, Jakarta has forced all ingot exports to trade via the Indonesia Commodity and Derivatives Exchange (ICDX) in an attempt to shut down illegal mining and shore up prices.

After exports of tin products increased, the government introduced the new regulations to close loopholes.

Kettle said he remains bullish on medium-term prices because Indonesian production is not sustainable at current levels and investment in new mine capacity is very low.

"World tin mine production is likely to be flat or declining over most of the next five years," he said.

Prices would have to increase to a minimum of $25,000 to stimulate new mine investment because of high capital costs and country risk, Kettle added.

(Editing by David Goodman)

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