THE 'TINNY' VOICE OF TIN GETS LOUDER!
By Ruma Dubey
Morgan Stanley has identified tin as the top base metal to invest in 2014. And looks like their gamble is paying off as price of tin has been soaring for some time now.
Yesterday, the metal on the London Metal Exchange (LME) was up and since the beginning of 2014, has risen 3% and is currently at $23,000/ton. There is now a scurry world over to find new deposits to meet the ever growing demand for tin. News on the streets is that tin could soon get to $24,000/ton levels.
This surge in tin comes in direct contrast to other metals, which have been beaten down post the weak economic data coming in from China. For almost all other base metals, the outlook remains dim yet this non-ferrous metal, tin, is doing very well.
Yes, this ubiquitous metal, shiny and bright has been galloping high quietly while the other metals languished. Indonesia, the world’s largest tin supplier, is staring hard at an acute shortage, for the fifth consecutive year. It accounts for 40% of global tin trade. In 2013, global demand for tin was 3,44,000 tonnes while production was at 3,41,000 tonnes. Barclays has put out a report stating that we could have a deficit in 2014 also, to the tune of 5000 tonnes.
Morgan Stanley expects shortage to increase four fold and through 2016, demand is expected to outstrip supply and predicts a shortfall of 100 metric tones in current year. This metal is used almost in every sector for soldering and packaging, more so in electronics sector. Almost every lap top, smart phone and every discernible electronics item needs tin and given the way in which demand for electronics is soaring, naturally, demand for tin is expected to only rise. China, the largest user and producer, which earlier was an exporter of the metal has turned to importing metal as domestic mine reserves depleted.
In December 2012, Indonesia issued a decree stating that tin smelters in the country will need to have a minimum purity of 99.9% from July 2013. The previous requirement was 99.85% and currently what we are also witnessing is a period of transition. Indonesia's top two tin producers, state-owned PT Timah and private sector, PT Koba Tin, already export tin that meets the 99.9% and this move was aimed at small-scale smelters and illegal exporters. And this is the quality of tin required for all soldering needs. Most of the smelters will not be able to upgrade to this new purity standard and this is what will also create a shortage.
The scene in India. Well, we are a very small when it comes to this base metal with production around 50-60 tonnes in FY13. Most of our needs are met through imports and the two big listed companies in this are Hindustan Tin Works and Tinplate Company of India. 55% of India’s tin needs are imported.
As per the report put out by Indian Bureau of Mines, there are a total of six mines in India of which 5 are in the private sector and one in the public sector. In FY13, production was at 47.776 kgs, down from 48,765 kgs in FY12.
Hindustan Tin is mainly into making cans, 20% of its production is used to make tin cans and has a dominant position in the food packaging industry. It exports around 15% of its production and imports around 25%. It trades in tin and that brings in 25% of its revenue.
In the private sector, Tinplate Company of India, promoted by Tata Steel, is India’s largest indigenous producer of tin coated and tin free steel sheets. Apart from the food packaging sector, it also caters to chemicals, paints, electronics, defence and has a 35% market share. It exports around 25% of its production.
These companies will not benefit directly from this shortage but yes, given the global trend of rising tin prices, it too will get higher realisations. India’s tin does not figure out much in the global arena. But in the domestic market need for tin is expected to zoom up with growth in food processing industry, more electronics goods, growing urbanization.
Yes, for now, tin seems to be the only bright metal in the global metal market.