Why Prices of LME Tin and SHFE Tin Become Divergent? SMM Reports

SHANGHAI, Jun. 12 (SMM) – Last week, tin prices surprised market participants. LME tin surrendered all previous gains during Asian trading hours on June 9 after historic-low inventory shored up the prices, registering lowest level at $18,660 per tonne since February 2017. However, SHFE 1709 tin, which always underperforms LME tin due to oversupply, was more resistant to fall and edged up after a slight decline.

SMM attributed two factors to the divergence on prices between LME tin and SHFE 1709 tin.

First, Yunnan Tin Company (YTC), the largest tin-producing company in China, announced on June 5 that the company has received sole permission from China’s Ministry of Commerce to carry out the processing trade of tin concentrate on April 20, 2017. This raised market anticipation on global tin supply growth and supply decrease in China. LME tin thus dived sharply after underselling with anticipation of rising supply, which amended price gap between LME tin and SHFE 1709 tin. Moreover, prediction on falling tin supply in China also helped SHFE 1709 tin to rise.

Second, LME tin recorded firm movement and broke through $20,600 per tonne briefly after LME tin inventory fell to lowest level since 1989. LME tin fell continuously last week after it only declined slightly when other metals slumped.

As of June 9, LME tin fluctuated at around $19,000 per tonne and the contract will not fall below the previous lowest level at $18,600 per tonne in a short term. LME tin will rally to $19,600 per tonne, or even $20,000 per tonne after stopping the drop with support from $18,600 per tonne. SHFE 1709 tin will keep fluctuating at current level in a near term, finding support at 140,000 yuan per tonne but meeting resistance at 144,000 yuan per tonne. In China’s spot market, spot tin will be traded at lows with brisk transaction and prices will be hard to rise due to sufficient inventory, and traders will take wait-and-see stance at high prices.

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