The International Tin Research Institute (ITRI) forecasts a supply deficit for the soldering metal in the coming months.

Although issues such as the slowdown in the Chinese economy and potentially shrinking demand still overhang the market, the organisation believes the structural supply deficit will carry on unless there is investment in sustainable new supplies.

“There really is a need to invest and invest now to bring about sufficient supply growth to match the growth in demand and take advantage of the improvement in prices three to five years down the road,” Peter Kettle, ITRI markets manager, told market participants at the body’s seminar in London at the end of November.

In the near term, a small decrease in demand is expected. In its latest survey of tin users, covering 148 companies that account for about 46% of global refined use, ITRI found a 3% fall in demand expected for 2015, with no recovery on the cards for 2016.

The dominant negative factor is expected weakness in the Chinese solder market, although world production is falling more rapidly than demand, mainly because of tighter regulations in East Asia.

In 2015, world refined tin production was down 7.7% year-on-year to 340,600 tonnes, with projected production of 336,800 tonnes in 2016.

“You end up with a supply shortfall of about 6,000 tonnes this year. It’s not as big as we were talking about earlier in the year but we have seen reductions in demand,” Kettle said.

“Overall, the supply-demand picture still looks supportive to prices. Moving forward to next year, assuming no more growth in demand but, at the same time, continuing supply constraints, the shortfall could be in the order of 10,000 tonnes,” Kettle added.

Furthermore, a rise in prices “significantly above” $15,000 per tonne will be needed to make new mine supply financially viable, according to Kettle.

“There’s still a lot of concern about the downside risk and the consumption outlook […] The most important story is the supply side and the impact of lower prices,” he added.

Claire Hack
Twitter: @clairehack_mb