SHANGHAI, Sept 1 (SMM) - According to the SHFE public data, SHFE tin inventory continued to decline for the fourth consecutive week. As of August 26, the weekly SHFE tin inventory had fallen 13.98% to 2,431 mt, a lowest level in the past three months. At the same time, SMM social inventory of tin ingots had also dropped to 3,530 mt, a low level in nearly three months. What are the reasons behind the continuous drop in tin inventories?
In terms of supply, some smelters had not yet resumed the production, and those who had resumed still suffered tight raw materials, which prevented the output from returning to the normal level before the maintenance.
In terms of demand, apart from the rising demand for domestic tin foil, some smelters whose lead ingots were the SHFE non-deliverable brands delayed the production resumption, which tightened the spot supply of some brands. At the same time, the operating rate of downstream tin solder manufacturers rallied, and some manufacturers increased the purchases of raw materials as their fear of falling prices abated.
According to SMM survey, the average operating rate of tin smelters in Yunnan and Jiangxi provinces last week remained stable from the previous week.
1. The average operating rate of tin smelters in Yunnan dropped slightly week-on-week. SMM survey shows that the overall production of mainstream smelters in Yunnan remained stable last week, but several smelters had no finished product output amid production adjustment, which dragged down the average operating rate. As last week basically marked the end of August, smelters told SMM that the output in the first month of September would hardly return to the normal level before maintenance even with the production resumption.
2. The average operating rates in Jiangxi picked up slightly compared with the previous week. The local large smelters maintained normal production, and the increase in the average operating rate was attributed to the production resumption of several smelters. Considering that some smelters were still suffering tight raw materials, it is expected that the average operating rate in Jiangxi may still fluctuate within a narrow range in the short term. Altogether, the average operating rate of smelters in Yunnan and Jiangxi provinces was basically unchanged. In view of the current stable production in the two provinces, it is expected that the average operating rate of the two provinces will continue to remain stable in the near future.
To sum up, the tight supply of raw material was still the main reason for the continuous fall in the tin inventory. With the gradual opening of the import profit window, it is expected that a new round of imported tin will arrive in mid-to-late September. Since the supply will steadily increase while no obvious improvement has been seen in demand, the tin inventory data is expected to stop falling and stabilise in September.
