Once Again Back to Pre-Speculation Levels, SHFE Tin Leads the Decline in Non-Ferrous Metals? [Wenhua Observation]

On April 2, since the announcement of the US reciprocal tariffs, major global capital markets have been sold off, and non-ferrous metals have experienced significant declines. SHFE tin has accumulated a drop of 12%, ranking among the top in the non-ferrous metal category. Tin ore has supply constraints, and the fundamentals provide some support, so why has the decline been significantly greater than other varieties? The supply-demand imbalance is prominent, and the volatility is relatively large. After the Chinese New Year, the center of tin prices has been continuously rising, mainly due to unexpected events affecting overseas tin ore supply. In early February, the intensification of armed conflicts in the DRC raised concerns about African tin ore supply, driving tin prices up. However, at that time, the Bisie mine had not yet halted operations, and the brief rise in tin prices was followed by a noticeable pullback. On February 26, the Wa State Industrial and Mineral Resources Administration issued a document on the process for handling mining, beneficiation plant, and exploration licenses. The market expected the resumption of Myanmar's tin mines, and under the influence of this news, tin prices fell sharply to 255,000 yuan/mt. On March 13, Alphamin Resources, the operator of the Bisie mine in the DRC, announced a temporary halt to operations in the eastern DRC due to the advance of rebel armed groups towards the company's mining area. The Bisie mine, which accounts for about 6% of global tin ore supply, ceased operations, pushing tin prices up to 290,000 yuan/mt. Subsequently, as the resumption of Myanmar's mines became clearer, tin prices fluctuated and pulled back to 275,000 yuan/mt. On March 28, 2025, a 7.9-magnitude earthquake occurred in Myanmar. Since the main tin ore production area was far from the epicenter, tin prices did not see a significant increase on the day of the earthquake. However, the Wa State's planned resumption symposium for the Manxiang mining area, originally scheduled for April 1, was postponed, indicating a possible delay in the resumption of tin ore production, which heightened market concerns about tin ore supply and pushed tin prices up to the 300,000 yuan/mt mark. Reviewing the entire upward process of tin prices, the logic of tight tin ore supply gradually evolved, and tin ore smelting TC showed a continuous downward trend. Domestic smelters' operating rates were indeed slightly affected, but overall production remained relatively stable. The short-term sharp rise in tin prices was more driven by capital and sentiment, and the actual fundamentals could hardly support tin prices reaching around 300,000 yuan/mt. Therefore, this round of sharp decline in tin prices is a correction to the previous excessive exuberance that led to the significant rise. Currently, tin prices have fallen back to around 250,000 yuan/mt, essentially returning to the starting point of the post-Chinese New Year rise. In comparison, other non-ferrous metals have already fallen below pre-Chinese New Year levels, even breaking the lows of early January. In this sense, tin prices are more resilient compared to other metals. Tariffs continue to escalate, and tin demand may be hit. After decades of development, the US has gradually formed a pattern dominated by high-tech and financial industries, with manufacturing gradually hollowing out. Since the pandemic, US economic growth has become more reliant on loose fiscal and monetary policies, continuously pushing up debt and inflation. By the end of 2024, the total federal government debt in the US had exceeded $36 trillion, reaching a historical high. The new US president's core demand is to reduce debt, prioritize US production, and promote the return of manufacturing. Fiscal measures include "increasing income and reducing expenditure," imposing comprehensive tariffs externally, reducing military spending to increase income, and streamlining the government internally to reduce expenditure. Due to the urgency of controlling debt, this round of tariffs is significantly different from the 2018 situation, where the tariff policy was partial. This time, the US has imposed tariffs across the board, with a much greater impact on capital markets than in 2018, exerting downward pressure on the global economy, and the market has begun to reprice the risk of a global economic recession. In tin end-use consumption, tin solder accounts for the highest proportion, at 48% in 2022, followed by tin chemicals, tinplate, lead-acid batteries, and tin-copper alloys, at 17%, 12%, 8%, and 7%, respectively. Regionally, global tin consumption is mainly concentrated in Asia, with 70% of global tin consumption in 2022 coming from Asia, of which China accounted for 46%, and the Americas and Europe accounted for 15% and 14%, respectively. Tin solder, as an important basic material for electronic materials, has a wide range of downstream applications, including consumer electronics, semiconductors, automotive electronics, PV, and smart home appliances, characterized by small products and a large market. Since 2018, China's trade structure has undergone significant changes, with the proportion of trade with the US continuously declining. In 2019, China's trade surplus with the US accounted for 85.2% of the total surplus, but it has now dropped to 38.5%. China's trade surplus with "Belt and Road" countries exceeds that with the US, reaching 39.0%. China's processing trade surplus with the US is mainly concentrated in mobile phones and computers, accounting for 35.3% and 34.9% of China's processing trade surplus with the US, respectively. The general trade surplus with emerging countries is mainly composed of buses, mobile phones, and low-value simple customs clearance goods, some of which flow into the US through re-export trade. Therefore, in this round of US "reciprocal tariffs," hefty tariffs have been imposed on China and Southeast Asian countries. Data shows that in 2024, China's total exports to the US reached 3,733.72 billion yuan, up 4.9% YoY, while imports from the US totaled 1,164.061 billion yuan. China's main export products to the US are concentrated in mechanical and electronic categories, totaling 1,547.584 billion yuan, accounting for 41.45% of total exports. Among them, smartphone exports were 250.15 billion yuan, accounting for 7%, laptop exports were 179.87 billion yuan, accounting for 4.8%, and exports of communication and audio-visual equipment and parts were 209.156 billion yuan, accounting for 5.6%. In addition, textile, footwear, and apparel products and furniture/toys/sports miscellaneous products were exported at 468.626 billion yuan and 459.461 billion yuan, accounting for 12.55% and 12.31% of total exports, respectively, forming the three pillars of China's exports to the US. China's imports from the US are mainly high-tech and resource products. Mechanical and electronic product imports were 269.73 billion yuan, accounting for 23.17% of total imports, of which integrated circuits and semiconductor manufacturing equipment and parts imports were 83.877 billion yuan and 31.946 billion yuan, respectively. Agricultural product imports were 190.1 billion yuan, accounting for 16.33%, and energy product imports were 164.3 billion yuan, accounting for 14%. China and the US have significant trade volumes in consumer electronics and semiconductors. The US relies on China for mature processes and consumer electronics tolling business, while China has a high demand for high-end chips and semiconductor equipment. On April 2, the US announced the imposition of "reciprocal tariffs" on all trading partners, with a 34% tariff on China, plus the previous 20%, totaling 54%. On April 4, China announced tariff countermeasures, imposing an additional 34% tariff on all imports originating from the US on top of the current applicable tariff rates. The trade conflict between the two sides has further intensified, and the US has threatened to impose an additional 50% tariff. If the tariffs are strictly implemented, it will have a significant impact on the consumption of consumer electronics and semiconductors in both countries, further impacting tin demand. In recent years, China's domestic mobile phone brands have risen, and the trade surplus in mobile phone complete machines has continued to expand, especially in exports to emerging countries. In terms of trade mode, there has been a gradual shift from processing trade to general trade, which may indicate that China is transitioning from mainly supplying overseas brand tolling business mobile phones to "Belt and Road" countries to supplying domestically produced mobile phones. In 2024, the global market share of domestic brands increased by 29.5% compared to 2023. Domestic mobile phones have significant advantages in performance and cost-effectiveness, and they can continue to explore emerging country markets in the future. However, China's high-end semiconductor technology still needs breakthroughs, and short-term supply chain stability may be impacted. Overall, as the intensity of this trade conflict far exceeds previous ones, the impact on the global economy is relatively significant. Future policies remain uncertain, and how long the reciprocal tariffs will last, and whether they may change through negotiations in the future, are all unknowns. This means that short-term global asset price volatility is unlikely to subside quickly. Although the tin supply side has strong support, the impact of tariff escalation on demand is also quite severe. In the short term, tin prices are unlikely to strengthen independently and will mainly follow the fluctuations of the non-ferrous metal sector. Although tin prices have pulled back significantly from their highs, tin prices are still relatively high compared to other metals, only retracing the post-Chinese New Year gains, which is also influenced by fundamental support. In the case of a prominent supply-demand imbalance, short-term futures prices are highly elastic, and significant volatility may continue.