[SMM Analysis] SHFE Tin Expected to Rally Strongly After Holiday Opening: A Review of the Logic Behind LME Tin's Nearly 3% Surge During the National Day Holiday

• Overview of Market Performance During the National Day Holiday

During the 2025 National Day holiday (October 1 to October 8), the global commodities market performed strongly, with the metals sector overall showing an upward trend. In this wave of "metal frenzy," tin prices stood out particularly, becoming the focus of market attention. The London Metal Exchange (LME) tin price rose sharply during this period, with a cumulative increase of 2.71%, closing at $36,370/mt, and at one point reaching a high of $37,600/mt. Similar to tin prices, other major nonferrous metals also generally rose; LME copper, zinc, and aluminum increased cumulatively by 3.38%, 4.25%, and 2.91% respectively, while the precious metal gold broke through the historical psychological barrier of $4,000 per ounce.

The rise in tin prices during the holiday was mainly driven by two factors: first, expectations for supply tightening triggered by Indonesia's crackdown on illegal mining; second, fluctuations in the US dollar due to heightened expectations for US Fed interest rate cuts. It is worth noting that tin prices surged sharply at the beginning of the holiday due to stimulus from the Indonesian policy news, followed by a technical pullback, overall exhibiting a characteristic of "retreat after rapid rise, closing slightly higher." This pattern indicates that the market reacted relatively rationally to the supply-side news, with prices returning to being dominated by fundamentals after digesting the short-term sentiment shock. Compared with the international market, the domestic tin market was closed for the National Day holiday, avoiding the sharp volatility brought by short-term sentiment shocks.

This wave of sharp rises was primarily directly stimulated by the news of Indonesia's crackdown on illegal mining. On September 30, Indonesian President Prabowo Subianto ordered the closure of 1,000 illegal mining sites in the Bangka Belitung Islands province of Sumatra and comprehensively blocked smuggling channels. As Bangka Belitung is a globally important tin ore resource aggregation area, changes in its supply have a profound impact on the global tin market.

The intensity of Indonesia's crackdown on illegal mining this time is unprecedented. President Prabowo emphasized: "Approximately 80% of tin ore production in Bangka Belitung is smuggled abroad through various channels," and declared that "all smuggling channels are now completely blocked, with absolutely no way out, not even by canoe." This strong statement triggered intense market concerns about tightening global tin supply. However, market sentiment shifted significantly after September 30, with LME tin prices moving in the doldrums. This was partly because, after the sharp reaction in the previous trading day, the market had digested some of the expectations for "tight supply"; on the other hand, it was due to profit-taking funds choosing to cash in before the holiday. As of October 7, LME tin prices fluctuated around $36,370/mt, pulling back from the holiday peak but overall remaining relatively strong.

• Macro Environment and Support for LME Tin Prices

During the National Day holiday, changes in the global macro environment also provided significant support for tin prices. On October 1, the US federal government officially "shut down" after running out of funds, marking the first government shutdown in seven years. The shutdown delayed the release of important economic indicators, such as the non-farm payrolls data originally scheduled for October 3, plunging the market into a "data vacuum" and significantly increasing uncertainty. Against this backdrop, risk-off sentiment became a major force driving the market, with prices of traditional safe-haven assets like gold soaring. Nonferrous metals, as commodities with financial attributes, also gained favour from safe-haven funds.

More importantly, US economic data strengthened expectations for US Fed interest rate cuts. The September ADP employment report showed that private sector employment in the US decreased by 32,000, far below the market expectation of an increase of 50,000. This weak data led the market to increase bets on the Fed cutting rates twice more within the year. According to the CME FedWatch Tool, the probability of a 25-basis-point rate cut by the Fed in October rose to 99%. The strengthened rate cut expectations caused the US dollar index to fall below 97.5 at one point. Although it subsequently rebounded above 98.5, driven by a sharp depreciation of the yen and a weaker euro, the index overall remained at relatively low levels. A weak US dollar provided additional support for LME tin prices, which are denominated in US dollars.

•  Post-Holiday Opening Performance and Supply-Demand Fundamentals

The most-traded SHFE tin contract performed strongly, closing the morning session at 286,470 yuan/mt, with a intraday gain of over 2%. The contract opened at 280,200 yuan/mt today, significantly higher than the previous trading day's closing price, and once climbed to a high of 286,530 yuan/mt during the session, showing positive momentum from bulls.

Supply side, domestic tin ore supply remained tight. In October, some smelters in major production areas like Yunnan maintained shutdowns for maintenance, providing strong support for tin prices from the supply side. Demand side, high tin prices somewhat suppressed downstream consumption. Currently, demand from the consumption side improved MoM, but there was no significant peak season effect. Tin's main downstream application areas include semiconductors, PV, and home appliances, with the semiconductor industry performing relatively well. In August, domestic integrated circuit production was up 3.2% YoY, showing a mild recovery. However, the PV sector, affected by overcapacity and trade frictions, performed relatively weakly, dragging on tin demand. Overall, the tin market demand side shows characteristics of "mild recovery, but limited bright spots." Notably, the dampening effect of high prices on physical demand has begun to emerge. Acceptance of current price levels in the spot market is limited, with downstream enterprises mostly purchasing as needed and avoiding large-scale stockpiling. If tin prices remain high, a further demand slowdown cannot be ruled out, which would constrain the upside room for prices.

•  Later Price Trend Forecast

Looking ahead, changes on the supply side will continue to be a key factor influencing tin prices. The long-term impact of Indonesia's crackdown on illegal mining warrants close attention. Although the Indonesia Tin Exporter Association stated that this rectification action has limited impact on mainstream large-scale mines, small and medium-sized private smelters reliant on illegal ore sources will face pressure from reduced raw material supply, and their operating rates may come under pressure. More importantly, there is another layer of uncertainty in Indonesia's tin supply: after the adjustment to the RKAB (mining business license) approval cycle, enterprises need to resubmit relevant documents in October 2025, with the actual approval process potentially delayed until early 2026. Consequently, significant volumes of tin ingot shipments will also be postponed to February-March of the following year. This adjustment could lead to a phase of tightness in global tin supply before Q1 2026.

Short-term, domestic SHFE tin is expected to open higher after the holiday and then fluctuate at highs, with the most-traded contract's main trading range between 275,000 and 289,000 yuan/mt. After the short-term sentiment impact from Indonesian policy shocks gradually fades, market focus will return to fundamentals. The pattern of tight supply and mild demand recovery will support prices, but the suppression of physical demand by high prices may limit the upside room.

•  Summary and Outlook

Overall, the medium and long-term trend of tin prices will depend on the interplay of supply-demand fundamentals. Against the backdrop of constrained supply growth and positive long-term demand prospects, the price center of tin is expected to maintain an upward trajectory. However, short-term fluctuations are inevitable, and investors need to closely monitor factors such as the implementation of Indonesian policies, the progress of production resumptions in Myanmar, and the actual performance of downstream demand.