TIN - YOU CANNOT CAN THIS METALS PRICE!

By Ruma Dubey

Most of the metals are being beaten down to a pale hue and the outlook also, in the immediate future remains dim. Not many people are recommending buying into metal stocks yet in all this gloom of metals, there is one non-ferrous metal is doing very well – tin.

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 fourth consecutive year. It accounts for 40% of global tin trade and supply in 2012 declined 10% to 94,000 tonnes. This year Indonesia will ship the lowest  and as per a report put out by Bloomberg, sales are expected to drop 24% to 75,000 metric tonnes as most smelters will not be able to meet the higher purity standard set by Indonesia, the deadline for which starts in July. Based on a various forecasts, it has come out with a median and stated that prices this year will zoom up 17% at $28,750/tonne.

In 2012, tin it recorded the highest jump in prices amongst all metals, up 22%. Morgan Stanley expects shortage to increase four fold. This metal is used almost in every sector for soldering and packaging, more so in electronics sector. Demand for tin, as per Morgan Stanley, is expected to rise to 361,000 tonnes in 2013 while supply is around 357,000 tonnes. And to make up for the shortfall, some 70,000 tonnes more are required to meet the demand from 2012 to 2016 which is expected to rise 2% per annum.  

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 FY12. 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, in March 2012, production of concentrated tin was at 3721 kgs compared to 3350 kgs in Feb’12. And for FY12, production was at 48,971 kgs v/s 60,643 kgs.

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, defense 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.