A Brief Analysis of Why Tin Hit Historical High [SMM analysis]

SHANGHAI, Mar 8 (SMM) - SMM focus analysis: The tin prices refreshed the historic high again yesterday (March 7). As of the close, the closing prices of the most-traded SHFE tin contract remained at the intraday high, sustaining the upside momentum throughout the day. SMM believes that the main reasons for the strong tin prices were as follows: 1. Under the influence of the tension between Russia and Ukraine, the sharp rise in energy prices such as crude oil drove up the prices of commodities, while a heated market added upward momentum to the rising tin prices, speeding it up to historical high. 2. The pandemic in Myanmar, one of the main import channels of tin ores in China, repeated several times. The market was worried about the tight supply of ores in the future, and the supply of raw materials was still uncertain. 3. Recently, LME tin still outperformed SHFE tin, and the falling SHFE/LME price ratio closed the domestic import window. Previously, there had been quotations on forward tin imports in the domestic spot market, and the market was worried that the supply of refined tin would be tight after the import window was closed.  

In terms of demand, the output of the spot market was still deviated from expectations according to traders' feedback. According to SMM research, after the Spring Festival holiday, the recovery of terminal enterprises was slower than in previous years, resulting in the deviation of market demand. The main reasons for the deviation were that export orders were subject to shipping pressure, and it was more difficult for companies and workers to resume the production under the repeated pandemic. From the perspective of solder companies, the continuous rise in tin prices lowered the profit margin. Moreover, the fierce competition made it hard for processing fees to increase, and the rise in the costs of raw materials boosted capital costs, which affected the companies’ production enthusiasm. According to SMM preliminary research, the recent rise in tin prices had little impact on large-scale solder enterprises, and short-term fluctuations in raw materials only caused fluctuations in profits but not affecting the production plans. However, small and medium-sized enterprises were greatly affected, and the production resumption after the holiday was less than expected.  

To sum up, since the prices of tin had been rising for a long time, today's sharp rise was more influenced by market sentiment. The fundamental supply and demand which was the driving force for prices trends was still relatively stable, and the pattern of weak supply and demand had not changed for the time being. Therefore, SMM suggests that after the market sentiment cools down a little, it is necessary to pay attention to whether the recent weak demand in the domestic spot market and spot discount shipments will suppress the continued rise of tin prices.