Tin Market Experienced Marginal Improvement on the Fundamentals

SHANGHAI, Feb 28 (SMM) - On the fundamentals, the supply and demand of refined tin in China is expected to remain relatively balanced in the short term.

First of all, refined tin inventory rose slightly during the Chinese New Year (CNY) holiday, as some smelters maintained production while the downstream mostly took the holiday. Meanwhile, the post-CNY holiday demand has partly been fulfilled in advance as the downstream companies restocked ahead of the holiday. In addition, the downstream demand recovered slowly amid high tin prices post the holiday, and they stood wait and see regarding the price trend.

The operating rates of smelters rose steadily after the CNY holiday. According to SMM research, the average operating rate stood at 59.17% in the past week, flat from the normal level in 2021. Nonetheless, the downstream demand has been suppressed by high zinc prices, and they purchased mainly on rigid demand.

In addition, as the major producing and consuming areas of tin solder in China, the production of tin solder in Pearl River Delta and Yangtze River Delta has been affected by the repeating COVID-19 pandemic in Shenzhen and Suzhou, as some workers were unable to return to their work, dragging on the operating rates of some downstream companies. The downstream orders for tin solder were only 80% of the normal level in 2021 as of last weekend.

According to statistics, SHFE warrants inventory added 511 mt or 19.28% in the first week post the CNY holiday from 2,650 mt to 3,161 mt. The inventory dropped by 366 mt and 40 mt respectively in the following two weeks to 2,755 mt with the recovery of terminal demand.

The social inventory of refined tin also climbed from 3,409 mt as of January 28 ahead of the CNY to 4,470 mt on February 7, the first working day post the holiday, an increase of around 31.12%. The social inventory then dropped by 779 mt and 143 mt respectively in the next two weeks to 3,390 mt as the downstream demand picked up.

Tin futures prices have been high since the CNY holiday, and the upstream smelters and traders’ quotes have been in premiums, which narrowed slightly recently. Nonetheless, the spot transactions have been muted. Some small-sized smelters and traders lowered their quotes to flat level or even discounts of SHFE 2204, and some were even as low as -4,000 yuan/mt over the April contract. The upstream smelters differed greatly on future price moves in light of high spot prices and meagre transactions. In addition, with the opening of import window, around 1,000-2,000 mt of refined tin are expected to enter the China market, which will supplement the domestic supply to some extent.

The supply and demand concerning the refined tin market in China will change from tight supply to a brief balance in the short term.