Go long on SHFE tin when the price is low.

Tin prices have fallen sharply recently. Looking ahead, on the macro front, the US economy is expected to slow down this year, and the US Fed may extend the period of maintaining the current interest rate level. On the supply and demand front, the continuous implementation of trade-in and equipment renewal policies in China is boosting the demand for non-ferrous metals in the manufacturing and consumer sectors.

Myanmar's tin ore accounts for approximately 30.38% of China's tin ore imports and 47% of the total domestic tin ore supply. According to customs data, China's tin ore imports in April 2025 were 9,800 mt (equivalent to approximately 4,336 mt (metal content)), up 18.48% MoM and down 4.22% YoY. From January to April, cumulative tin ore imports were 36,700 mt, a significant year-on-year decline of 47.98%. Since Myanmar implemented a ban on tin ore mining in August 2023, China's tin ore imports from Myanmar have remained at a low level due to the uncertainty surrounding the resumption of production. The downward trend in import volumes continued in April 2025, primarily due to unstable import profitability and the impact of the situation in Myanmar's Wa region.

The tight supply of tin ore has led to a 40% decline in processing fees. The processing fee for tin concentrates in Yunnan Province dropped from 17,000 yuan/mt from May to July 2024 to 12,000 yuan/mt, which is lower than the 13,550 yuan/mt at the end of March 2023 and close to the cost line of some enterprises, leading to production cuts by some enterprises. Currently, processing fees are hovering near the lowest levels in the past six years.

The tight supply of tin ore has been transmitted to the refined tin smelting sector. The shortage of ore sources is directly reflected in production data: in the week ending May 23, the operating rate of refined tin smelters in Yunnan and Jiangxi provinces was 56.44%, down 0.66 percentage points from the previous week, with operating rates in Yunnan and Jiangxi being 65.48% and 41.02%, respectively. In Yunnan, smelters are under sustained profit pressure due to low tin ore imports from Myanmar and depressed processing fees. In Jiangxi, some enterprises are struggling to resume production due to insufficient recycling volume of scrap tin and declining processing fees. In April 2025, China's refined tin production was 15,200 mt, down 0.5% MoM and 8.1% YoY. It is expected that production will increase by approximately 2% MoM in May.

In downstream industries, tin solder demand accounts for 68%, with the semiconductor sector accounting for 80% of total tin solder demand. In April 2025, the overall sample operating rate of domestic tin solder enterprises was 76.7%, up 0.9 percentage points from March but below market expectations. It is expected that the operating rate will remain low in May. Currently, orders from traditional downstream industries have not yet surged, with just-in-time procurement being the main focus, and spot market transactions remain sluggish.

However, global semiconductor demand provides long-term support for the tin market. Global semiconductor sales increased by 18.8% YoY in Q1 2025, and the market size is expected to grow by 11% YoY for the full year, potentially boosting global tin demand by 4.4%. Additionally, the operating rate of primary lead production in the three provinces rose slightly by 0.4 percentage points to 67.75% last week. Despite the off-season in the battery market limiting further rebounds in the operating rate, production remained at a high level in recent years.

The domestic tin market has entered a destocking cycle, but the rate of destocking has slowed. As of the end of last week, SHFE tin inventory stood at 8,445 mt, a decrease of 28 mt from the previous week; LME tin inventory was 2,665 mt, down 70 mt from the prior week. According to SMM data, the total social inventory of tin ingots in the three regions was 10,333 mt on May 27, an increase of 374 mt from the previous week.

The tin market is exhibiting a pattern of "constrained supply and promising demand." Conflicts in the DRC and earthquakes in Myanmar have heightened market concerns about the supply side. Coupled with the delay in the production resumptions in Wa State, refined tin production continued to decline YoY. Despite being in the off-season, the growth in demand from the semiconductor industry provides some support to the tin market. From a cost perspective, current prices are approaching the range of the tariff floor and cost floor. SHFE tin below 258,000 yuan/mt presents an opportunity to establish long positions at lows, with a medium-term target above 290,000 yuan/mt and a long-term target above 330,000 yuan/mt.

(Source: Futures Daily)