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SMM Monthly Review: Tin Prices Stable in Jul, and Production Recovery in Aug Is Subject to Downstream Demand
Jul 28, 2022 15:11CST
Source:SMM
SHFE tin prices were relatively stable throughout July. As of noon July 28, the contract dropped 6.26% on a monthly basis, which was less volatile compared with the monthly drop of 24.77% in June.

SHANGHAI, Jul 28 (SMM) - SHFE tin prices were relatively stable throughout July. As of noon July 28, the contract dropped 6.26% on a monthly basis, which was less volatile compared with the monthly drop of 24.77% in June.

Spot prices

SMM #1 tin prices fell 2.6% throughout July as of July 28.

According to the latest survey by SMM on July 27, the quotations offered by some smelters were lowered along with the futures prices during the early trading. According to the feedback from traders, the number of quotations heard in the market increased in early trading, and the premiums were relatively stable against the palpable drops of SHFE tin. The market transaction improved, and the sales in Guangdong were poorer than than in Shanghai. Downstream companies purchased on rigid demand, and brands with low premiums were more popular.

Tin ingot premium/discount

Tin ingots were mostly quoted with premiums in July with slight drops. Narrow discounts showed up on July 21.

Operating rates

The operating rates in Yunnan and Jiangxi were relatively stable in July, according to SMM statistics. 

The operating rates in these two provinces rose slightly last week as more smelters resumed the production.

In detail: The operating rates in Yunnan remained low despite slight rebound last week. Most smelters have resumed the production in Yunnan except for some large ones. However, due to the relatively thorough shutdown during this round of maintenance, it will take a long time for the production to fully restore. Therefore, some smelters with large output will not be able to resume normal supply until August. Slightly rising operating rates last week were contributed by the conversion of intermediate products to finished products by smelters that resumed the production earlier. 

The weekly operating rates in Jiangxi also rebounded slightly last week. The smelters in Jiangxi that were not overhauled last week still maintained normal production and shipments. Other smelters were also resuming the production, but it will take time for most finished products to enter the market. The growth in operating rates was allowed by the production ramp-up of a few smelters. 

To sum up, the comprehensive operating rates in Yunnan and Jiangxi provinces maintained a slight growth as expected. The operating rates are expected to grow further with the further production resumption of large smelters.

Import profit/loss

As of July 27, tin ingot imports in July were in a state of loss, but stepped into the profit-making territory today.

Inventory

Domestic tin ingot inventory kept falling in July, while LME tin ingot inventory was on the rise.  As of July 27, SHFE tin warrants dropped 4 mt to 3,283 mt, and LME tin inventory rose 50 mt to 3,720 mt.

SMM Prospect

On the macro front, the Federal Reserve announced a 75 basis point interest rate hike early this morning, raising the target range to 2.25%-2.5%, and is expected to continue to raise the target range. Moreover, Powell suggested that "I do not think the U.S. is currently in a recession...This is a very strong labour market ... it doesn’t make sense that the economy would be in a recession with this kind of thing happening”. The economy should not fall into recession." This statement gave the market stronger confidence, but the US GDP in the second quarter is still of concern. After the Fed's resolution to raise interest rates by 75 basis points was announced, U.S. stocks surged, while the prices of cryptocurrencies and gold also rebounded. The prices of risky assets rose slightly, but the US dollar index fell. Recently, the domestic SHFE tin price has been less affected by the macro pressure.

According to SMM analysis, tin ingot social inventory is expected to resume the upward trend in mid and late August as most domestic smelters will resume the production in early August, while the consumption of downstream solder enterprises has not improved significantly, in addition to narrowing import losses. 

However, the supply of domestic tin mines has been tightening recently. The latest quotation of 60% tin concentrate TC in Yunnan has been lower than 20,000 yuan/mt, which may have a negative effect on the production enthusiasm of domestic smelters in the future. The current production of smelters have not yet returned to the pre-maintenance level, and most smelters will determine their production resumption process based on SHFE tin prices as well as downstream consumption. 

Therefore, if the subsequent tin ore imports resume substantial increase like in the first half of the year, the tin ingot market may see more supplies. SMM predicts that the tin price will fluctuate at a low level.

Market

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