Chinese paying a premium for tin imports
WHEN it comes to figuring out what is going on in the tin market, it seems to be a case of rounding up the usual suspect.
That, of course, is China, the world’s biggest producer both in terms of mining and refining. But it needs to import the metal to meet demand and China’s tin imports in September were up 125 per cent on the August figure and 167 per cent higher than in September last year.
At the close of Tuesday’s trading on the London Metal Exchange, tin sat at $US21,775 per tonne. However, domestic buyers in China are paying around $US29,000 per tonne.
According to ITRI, the British company that tracks the tin market, the Chinese premium over LME levels has varied between $US9900 and $US7000 since August.
The world tin market is in deficit and prices look likely to be sustained with Indonesian producers extending their export ban. It was to have ended this week, but will run until 2011′s end to try to force up prices. It is costing Indonesia’s largest producer, Timah, $US22,700 per tonne to deliver tin to customers and it needs at least $US24,000 to make it worth exporting again.
China’s growing demand has led to tin being run down in LME warehouses. Those levels are at 16,120 tonnes against a 52-week high of 23,425 tonnes. Some 4000 tonnes have been withdrawn in recent weeks, according to ITRI, most of it from LME warehouses in Singapore and Malaysia.
Why China’s demand is so rampant is not clear. The latest tin report from CRU International says many smaller consumers in China are facing hard times or have closed down due to falling orders from the EU and US.
Pessimism abounds in the Chinese solder sector, although output of electronics (which use a good deal of solder) remains solid. CRU believes the market mood is more negative than the real situation. Then there is tinplate used in the manufacture of cans for beverages and food.
The demand for such products is rising with the standards of living in developed countries among the newly created middle classes.
Thailand’s tinplate imports are up 70 per cent on 2009.
The country is fast becoming the canned-food capital of the world. Its canned tuna and pineapple account for 50 per cent of the world’s exports of those products.
Japan is the source of much of Asia’s higher-grade tinplate. JFE Steel has announced it is expanding production by 70 per cent and Nippon Steel is building a tinplate plant in China.
The problem, of course, is that tin prices tend to move with the rest of the base metals complex even though the deficit for 2011 could be 10,000 tonnes.
If it does fall below $US20,000 per tonne – for which you could blame Greece, Italy and the misguided notion of a European currency – that could keep the Indonesians out for quite a time.
Coking coal decline
COKING coal prices are set to fall further as we move into 2012.
Patricia Mohr, who heads the commodities team at Canada’s Scotiabank, says the decline in prices from record levels this year reflects the return to normal of export shipments after the Queensland floods combined with the recent fall in Chinese steel production.
That’s the short-term picture. Further out, though, Mohr sees demand being robust. She points out that only 35 per cent of China’s domestic metallurgical coal is of premium grade, the standard required in that country’s larger blast furnaces, and the gap will continue to be filled by imports. Moreover, India plans to triple steel capacity.
And even the short-term forecast might go awry: US meteorologists say we are moving back into La Nina, the cause of the Queensland floods this year.
The silver lining
SILVER enthusiasts have been a little down in the dumps of late.
But the metal seems to have found a base comfortably above $US30 an ounce.
While the most exciting aspect of silver is its rapidly expanding industrial and health applications, the investment side also has a bit of kick left in it.
Last year, US Mint sales of American Eagle silver coins averaged 2.8 million a month; in 2011, they’re averaging 3.7 million.
Now China Daily reports that silver forwards trading volumes on the Shanghai Gold Exchange in September were six times what they were for the same month last year. The paper says investors are switching out of troubled equities and property and parking their money in precious metals.