Interest Rate Cut Likely Inevitable, Tin Ore Supply Remains Tight [SMM Tin Morning Meeting Summary]

Last week, data released by the US Bureau of Labor Statistics showed that the US November CPI rose 2.7% YoY, in line with expectations, compared to the previous value of 2.6%. The November CPI increased 0.3% MoM, up from October's 0.2%, marking the highest level since April this year, also meeting expectations. The US November CPI continued to rebound, but the data fully aligned with forecasts, while core services inflation slowed MoM. Following the data release, the market estimated a 100% probability of a 25bp interest rate cut in December. Looking ahead, the US Fed faces little resistance to a December rate cut, but the tone may lean "hawkish." It is expected that during this month's FOMC meeting, Jerome Powell may emphasize that inflation remains on a downward trajectory, but given recent stagnation, the Fed is not in a hurry to cut rates again. The market may interpret this as a signal of a pause in rate cuts in January next year.

Last week, domestic smelting enterprises maintained relatively stable operating rates, with most companies able to sustain continuous and steady production operations. However, considering Myanmar's ongoing tin ore mining ban, the supply of tin ore resources remains tight. Against this backdrop, we anticipate a slight decline in operating rates among smelting enterprises in the Yunnan region in the near future. Meanwhile, as ore supply tightens further, tin concentrate TC has shown a downward trend, which will compress smelters' processing margins. Consequently, some smelters may implement minor production cuts to control costs and sustain operations.

In summary, SHFE tin prices last week were influenced by multiple factors, including the international economic environment, domestic supply and demand conditions, and regional production differences, resulting in overall volatility. In the long term, the upside room for tin prices remains limited and tin prices may face downward pressure. Investors should closely monitor market dynamics and cautiously assess risks to formulate reasonable trading strategies.