Shortfall talk pushes tin to record high

The price of tin, the metal used in soldering and packaging, jumped to a record high as traders braced for another year of supply shortfalls.

Peter Kettle, of the International Tin Research Institute, expects tin demand to outstrip supply by about 20,000 tonnes in 2011, following a shortfall of 22,000 tonnes last year that drove a 59 per cent rally in prices.

London Metal Exchange inventories of tin are just 17,550 tonnes.

“There’s not a lot happening in terms of building new supplies,” Mr Kettle said. “Longer term, we will see new mines starting up, but . . . it will probably take 2-3 years.”

On Tuesday, the benchmark tin contract for delivery in three months on the London Metal Exchange rose 0.7 per cent to $28,200 a tonne. 

Although all eyes have focused on copper, the darling of hedge funds, mining executives and commodity bankers, tin has been the best performing industrial metal on the LME so far this year, rising 5 per cent. Copper is down 4.2 per cent, trading at $9,270 a tonne on Tuesday, while nickel is the only other metal to have posted a gain in the year to date.

David Wilson, base metals analyst at Société Générale in London, said tin prices could touch $30,000 a tonne on the back of stagnating mine supply. “I see constrained supply being the key driver,” Mr Wilson said. “There has been such a long-term lack of investment in mine capacity.”

Tin prices have surged 180 per cent since the depths of the financial crisis as consumption by the electronics industry has rebounded. 

Global refined tin demand rose 12.5 per cent in 2010 to 360,000 tonnes, according to an ITRI survey released on Tuesday, with consumption by the solder industry contributing to the bulk of the increase. Chinese tin consumption rose to a record 147,000 tonnes.

However, Mr Kettle expected demand growth to moderate in 2011. 

High prices have not yet led to large-scale substitution out of tin by manufacturers, Mr Kettle added, but he warned: “We are worried as an industry about the difficult position that consumers are in. 

“If prices go higher, it will stimulate long-term efforts to find other materials, which could hit the industry five or 10 years down the line.” Source: Financial Times