We attribute tin’s price weakness this year to negative factors on the demand side, most notably in the solder sector, which accounts for 50% of global tin consumption.
This has been the result of a slowdown in global economic growth, exacerbated by increased technology tensions - especially between Japan and South Korea, with the latter the largest and fastest-growing semiconductor manufacturing equipment market in the world.
Based on the latest data from the Semiconductor Industry Association, global semiconductor sales (used as a barometer for solder demand) contracted by 11% year on year in January-July 2019 after a 16% increase in 2018. World Semiconductor Trade Statistics forecasts a decline of 13% during the whole of 2019.
We believe that the weakness in tin demand from the solder sector pushed global refined tin into a surplus of 3,000 tonnes in the first half of 2019, while refined output growth was stable year on year.
We believe that a rebound in tin prices is likely in the fourth quarter of this year and in 2020. This will be driven by two factors: first, the recent supply response from China (responsible for 50% of global refined tin output) to the slump in prices; and second, a pick-up in tin consumption from the solder sector on a possible de-escalation of technology and trade tensions.
On the supply side, the collective refined production cut of 20,200 tonnes (about 6% of global output) by 14 Chinese smelters announced at the start of September could have a substantial effect on the balance of the refined market if those cuts are implemented strictly.
On the demand side, we feel that technology tensions are likely to deescalate - especially from next year - after China, Japan and South Korea hold their annual trilateral summit in December 2019. This will be an opportunity to ease tensions and could result in a boost in semiconductor sales, benefiting tin demand.
We see a meaningful deficit of 13,000 tonnes in the second half of 2019 and a deficit of 7,000 tonnes in 2020. The under-supplied nature of the global refined tin market should underpin an overall upward trajectory in tin prices.
We forecast a base case for the LME cash tin price of $19,500 per tonne in October-December 2019 and $22,000 per tonne for 2020.
LME tin cash price, $/t
2019 forecast average price
2020 forecast average price
Tin has been the poorest performer among base metals on the London Metal Exchange in 2019 - down by 18% in the year to date - in sharp contrast with last year, when tin was the most resilient.