Tin Prices Extend Gains with Spot Tin Surging 31% in Two Months, Risk Aversion Increases

SHANGHAI, Jan 13 (SMM) - SHFE tin prices extended gains and closed 3.19% higher in the daytime trading on January 12. They climbed to 219,300 yuan/mt in the evening trading, the highest since June 28, 2022, and closed with gains of 0.35%. LME tin prices outperformed and refreshed a new high of $28,010/mt since June 23, 2022, closing up 2.58%.

On January 12, the SMM average spot price of #1 tin rose by 5,750 yuan/mt, or 2.76%, to 214,250 yuan/mt, a two-month rise of 31% from a low on November 3, 2022.

According to SMM survey , smelters were making quotations in a cautious manner and a few of them quoted with discounts. Spot trades were subdued amidst higher tin prices. Downstream enterprises purchased on demand, lacked buying interest as the Chinese New Year holidays approached.

Fundamentals

According to SMM survey, , the average operating rate at zinc smelters in Yunnan and Jiangxi rose slightly from a month earlier as of January 6. Treatment charges (TCs) of tin concentrate remained unchanged at low levels.

Operating rates in Yunnan climbed marginally from a month earlier. SMM survey showed that smelters which contribute to a majority of the output in the region currently maintain normal production. And the smelters that had briefly halted production previously due to environmental production factors have also resumed production.

The operating rate in Jiangxi fell slightly. Mainstream smelters in the region maintained stable production as a whole. Several smelters have planned to shut down for CNY holidays and have gradually cut output. 

To sum up, last week, the average operating rate of the two provinces rose more than expected on the back of pre-holiday restocking. Some smelters will slash their production as CNY approaches, so the average operating rate of the two provinces will drop in the near term.

According to SMM data , domestic refined tin output in December was 15,905 mt, a decrease of 1.82% month-on-month but an increase of 13.61% year-on-year. The cumulative output from January to December increased by 0.42% YoY. The actual domestic refined tin output in December topped expectations.

In January, tight raw materials supply and lower TCs squeezed profits at smelters. Meanwhile, high tin prices sidelined downstream buyers, and pre-holiday stockpiling underperformed the same period of past years. Some smelters have lowered their output forecast due to CNY-driven shutdowns. SMM expects domestic refined tin output in January to drop significantly compared with December, and stand at 12,290 mt.

In terms of imports, the loss of tin ingot imports has continued to narrow since the end of November 2022, and the import window has remained open from the end of December to January 12, 2023. The profit of tin ingot imports on January 12 has risen 457 yuan/mt from December 23, 2022 when the import window opened.

The current consumption in the tin market is relatively poor now that downstream enterprises have almost completed pre-holiday stockpiling. Stocks have accumulated in recent days. In the four days to January 11, tin warrants on the SHFE increased by 339 mt. In the meantime, upstream and downstream enterprises planned to close for CNY holidays, waning market demand.

To sum up, the fundamentals are not adequate to support the rise in tin prices. SMM believes that the recent surge in tin prices is attributable to the weakness of the US dollar and capital issues. The market shall watch if tin prices can remain strong as risk aversion increases.