FUND VIEW-High tin prices needed to address market imbalance

* Supply/demand imbalance resolved through prices

* 2011 to see a tin market deficit

A further rise in tin prices, after they have already hit records, is the only way to sort out the imbalance between demand and supply, U.S.-based fund manager Armored Wolf said.

Benchmark tin on the London Metal Exchange hit a record at $30,920 a tonne on Thursday. That is a gain of about 15 percent so far this year for the metal used in electronics, after a surge of 58 percent last year.

A crackdown on illegal mining in top exporter Indonesia since 2006, tighter export regulations in the country and output disruptions have pushed tin prices higher in recent years.

"The story in tin appears to be one where a tight supply/demand balance will be resolved through the price mechanism, and more likely with demand destruction than supply additions, said Matt Millar, a director at Armored Wolf.

"The time-line for a ramp-up in tin mining ... is long enough that it is difficult to imagine a robust supply response in 2011 ... We will probably be stuck with a deficit again in 2011," he said this week.

A Reuters survey published late January showed analysts expecting a deficit of 15,000 tonnes in the tin market this year.

That is a small percentage of global consumption, estimated at around 365,000 tonnes this year, but analysts say it is enough to drive prices higher.

Millar said fundamentals justify current tin price levels. "Even assuming moderately higher Indonesian production, there is very little on the current horizon that will cut demand besides yet higher prices. If not, why have prices risen so high?"

Indonesia is the world's second-largest producer of tin after China. Its refined tin exports fell 9.2 percent in December 2010 from the same month in 2009, while full-year 2010 exports fell nearly 7 percent as an unusually long rainy season curbed mining.

A senior official told Reuters last week Indonesia would restrict annual output to a 100,000 tonnes.

Millar disagreed with the idea that investors were behind price gains.

"The idea that investors drive prices higher is generally hogwash," he said.

"Investors can take delivery in the case of metals and hoard them -- hold them off the market. But that does not appear to be a major force in the market." Source: Reuters

Rubber Surges to Record on Supply Concern, Nears 500 Yen/Kg

Rubber jumped by the most in three months, rising to a record as crude oil’s rally boosted the appeal of the commodity and rain in Asian growing regions curbed output, raising concern that supply tightness may worsen. 

The July-delivery contract gained as much as 3.8 percent before settling at 489.9 yen on the Tokyo Commodity Exchange. In after-hours trading, the most-active contract surged to an all- time high of 499.9 yen a kilogram ($6,120 a metric ton). Transactions in this session will be settled tomorrow. 

Oil climbed for a second day as protests in Egypt turned violent, prompting concern that supplies may be disrupted and unrest may spread to other parts of the Middle East. Persistent rainfall in Thailand’s key plantation areas has limited supply, according to the Rubber Research Institute of Thailand. 

“Tight supply of rubber and a strong auto market boosted the price to a new high,” Gu Jiong, an analyst at commodity broker Yutaka Shoji Co., said by phone from Tokyo. “Oil trading above $90 a barrel is also supportive.” 

The most-active contract climbed 12 percent last month, extending last year’s 50 percent rally, as supplies from Thailand, Indonesia and Malaysia, the top three growers representing 70 percent of global supply, were curbed by rain while rising car sales led by China and India improved demand. 

La Nina, which started in June and usually lasts for nine months or more, has led to higher than average rainfall in most parts of Southeast Asia. The weather event’s strength may decrease during the next four months, the Malaysian Meteorological Department said in response to questions, supporting forecasts by the World Meteorological Organization.

‘Major Impact’

The weather event is having a “major impact” on rubber and palm oil production in Malaysia, as heavier rainfall may hamper harvesting and tapping, the Malaysian Meteorological Department said yesterday. 

The physical price of natural rubber in Thailand, the world’s largest supplier, advanced to 180.55 baht ($5.84) a kilogram today from 178.55 baht yesterday, the Rubber Research Institute of Thailand said. The price reached a record 181.55 baht on Jan. 25. 

Bridgestone Corp., the world’s largest tiremaker, said it will raise tire prices in North America by as much as 8 percent on April 1 because of the increasing cost of raw materials.

The Shanghai market will be closed until Feb. 8 for Lunar New Year holidays. May-delivery rubber in Shanghai climbed to a record 41,850 yuan ($6,350) a ton on Jan. 31. 

Natural-rubber consumption in China may rise 9 percent to 3.6 million tons this year and India’s consumption may gain 5.2 percent to 991,000 tons, according to the Association of Natural Rubber Producing Countries. 

China’s natural-rubber inventories rose for the first week in four, adding 126 tons to 58,673 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said on Feb. 1. That was a 61 percent decline from last year’s peak of 151,832 tons. 

Car sales growth in China will be around 10 to 15 percent this year, the China Association of Automobile Manufacturers said Jan. 10. Total auto sales, which include cars, trucks and buses, jumped 32 percent last year to 18.06 million, the association said. Source: Bloomberg

IMF admits wrong doing in Indonesia

The International Monetary Fund ( IMF) admitted that it had done "a wrong doing" during cooperation with Indonesia over ten years ago and would learn from the lesson, Managing Director of the IMF Dominique Strauss-Kahn said on Wednesday.

"We've drew a lesson from the way IMF and Indonesia worked together ten years ago. And certainly we did also something wrong and we have to accept that. So we've learnt this...," the director told a press conference after meeting with Indonesian President Susilo Bambang Yudhoyono at the State Palace.

Indonesia, which was one of the IMF debtors, paid all its debt to the international financial institution in 2006 after the country exited from the 1998/99 Asian financial crisis.

The director said the IMF today appeared with a better performance, which has changed from the past.

"So we're a new institution, a multilateral institution which is built to help the membership and having learnt from the past, including the Asian crisis, we want to be able to provide our membership with the best possible advice and with support when needed," the director said.

He said that with the reforms it had done, the IMF reflected a better state of the world and Indonesia had a bigger role.

"The main message today is simple: we have to look forward. The IMF has changed, we have a new IMF where the voting power and the voice of Asian countries have increased a lot. The last reform we made in the governance changed the IMF to reflect better the state of the world. And in current state of the world, Asia in general, Indonesia in particular, has a bigger role than in the past," the director said.

Indonesia has built strong fundamentals and stability which made it survive from the global financial routs in 2008/2009, then the country's economy developed to a growth of expected 6 percent in 2010.

Indonesia has nearly jumped to investment grade, as Moody's Investor Rating agency recently raised Indonesia's grade to one notch below investment grade.

The IMF forecast Indonesia's economy would accelerate at 6 percent this year and saw no problem which may hamper the growth, the budget deficit of 1.8 percent was considered reasonable.

"I expect a rather high growth for Indonesia this year, it can be over 6 percent. I don't see any real problem (which may affect growth) on this time. The budget that has been prepared is a budget with a higher deficit than last year's but still a very reasonable one," he said.

Although Indonesia has no need to have a fresh loan from the IMF at present and in the near future, the director said the international organization still build cooperation in the region.

"Nevertheless, we'll never know. That's why we're working with regional institution like Chiang Mai initiatives to try to build something for the region," he said. Source: Xinhua