Forecast:

     Very short-term (1M):
Flat

Short term (3M):
Flat

Medium term (6M):
Flat

Long term (12M):
Up

 

Resistances:
R1 20,000 - Key level
R2 22,000 - 2018 high (Jan)
Support:
S1 18,300 - 2018 low (Aug)
S2 17,000 - major support

Legend:
LME - London Metal Exchange
SHFE - Shanghai Futures Exchange
D/MMA – daily/monthly moving average
U/DTL –  up/downtrend line
ADX – average directional index
RSI – relative strength index
WBMS - World Bureau of Metal Statistics

Technical drivers
Short term:
The LME tin price is sitting on its 50 DMA, a daily close below which would bring out momentum-based sellers and exert even more downward pressure in the immediate term. If the 50 DMA holds, we expect LME tin to retest its October high.

Macro and micro drivers
The LME three-month tin price is down only 0.5% since the start of the week, proving ore resilient than the rest iof the complex, which is down an average 1.3% so far this week. Given that most of the weakness in base metals reflects fragile macro sentiment but that tin has relatively low sensitivity to macro forces, its resilience makes sense.

Recent  supply developments in China, which accounts for 24% of global mine production and 50% of global refined production, are price-supportive. Indeed, the Gejiu City government last week announced a plan to dismantle tin ore processing plants in Yunan, which is part of a relocation plan first mentioned in 2016 to better manage heavy metal pollution in the region.

Supply disruption is likely to emerge in December because factories built outside the Northern Industrial park will be shut. As well, ITRI estimates that the shutdown of 30 concentrators will remove around 1,000 tonnes per month of tin concentrates from the market, corresponding to 15% of monthly tin output.

But for now the market remains well supplied, hence the stability in physical rates, especially in a context where spot demand is relatively disappointing. Also, the tightness in LME nearby spreads has eased markedly. The cash/three month spread is at $13 backwardation per tonne compared with $52 backwardation per tonne yesterday.

The Chinese export window remains firmly closed despite the LME tin price rising 2% far in October while SHFE tin fell 0.5%. LME inventories should remain under downward pressure in the months ahead, with nearby spreads becoming incrementally tight, cresting the conditions for a higher LME tin price.

Flows in visible inventories


Exchange inventories rose 544 tonnes or 5% last week, pointing to a weaker fundamental picture.
  • LME tin stocks - at 3,235 tonnes tonnes as of November 5 - rose 40 tonnes or 1% last week after rising 220 tonnes or 8% in October.
  • SHFE tin stocks - at 7,899 tonnes as of November 2 - rose 504 tonnes or 7% last week after rising 877 tonnes or 13% in October.
Supply/demand balance



The World Bureau of Metal Statistics estimates the global refined tin market was in a deficit of 1,011 tonnes in August 2018 - a third consecutive monthly deficit. The cumulative deficit for January-August 2018 widened to 7,780 tonnes.


In the first eight months of 2018, global mine production rose 11% year on year to 235,990 tonnes while global refined production at 241,350 tonnes was down 1.9%. Apparent consumption was an estimated 249,030 tonnes, a 0.5% drop year on year.

The refined tin market was oversupplied in China and Indonesia, which had surpluses of 14,601 tonnes and 52,700 tonnes respectively. In the world ex-China/Indonesia, the refined tin market was in a large deficit of nearly 75,000 tonnes over January-August 2018, which compares with a deficit of 57,705 tonnes over January-August 2017.

Fastmarkets expects the global refined tin market to record a deficit of 7,000 tonnes in 2018.

Conclusion
We expect LME tin prices to continue to rise over the remainder of the final quarter of 2018, mainly reflecting expectations of incremental tightness that stem from Indonesia and China. Should risk sentiment improve further into the end of the year, tin could experience even stronger upward pressure.

Trading positioning: We do not have a hypothetical trading position for tin.


All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.