Forecast:

     Very short term (1M):
 Flat
Short term (3M): Flat
Medium term (6M): Flat
Long term (12M): Up

 

Resistances:
R1 17,000 - Key level
R2 18,000 -  Key level
Support:
S1 15,565- 2019 low
S2 15,000 - Support

Legend:
LME - London Metal Exchange
SHFE - Shanghai Futures Exchange
D/MMA – daily/monthly moving average
MACD – moving average convergence divergence
U/DTL –  up/downtrend line
ADX – average directional index
RSI – relative strength index
WBMS - World Bureau of Metal Statistics
ITA - International Tin Association
ICDX – Indonesia Commodity & Derivatives Exchange
SIA - Semiconductor Industry Association
WSTS - World Semiconductor Trade Statistics
CTA - Commodity Trading Advisor
COT - Commitment of Traders


Technical drivers
  • The LME three-month tin price has breached the October high this month but it remains below its September high, suggesting that the current rebound is still embryonic.
  • The 10-day momentum indicator is positive and the ADX is above 21, suggesting a strong uptrend.
  • In the short term, the key resistance is the 200 DMA, a daily close above which could point to a new bull market.
  • In the monthly chart, however, a death cross has emerged, with the 20 MMA breaking below the 200 MMA. A death cross ultimately tends to pressure prices lower
  • In our technical base-case, we expect the recovery in tin, which started late in August, to continue in the next three months.
Macro drivers
The LME tin price is stable so far on the morning of Monday December 23 after climbing by 0.5% last week.

LME tin is back into a small backwardation ($5 per tonne) after being in contango of $41 per tonne at the end of last week. The renewed tightening at the front end of the curve could imply some short-covering.

Tin's spec positioning is too light compared to the rest of the base meals. Stronger refined market conditions could produce a positive swing in spec sentiment, which in turn would push prices higher.

Reflation seems to have re-emerged, caused by recent signs of stabilization in global manufacturing data and expectations for better economic conditions after the de-escalation of US-China trade dispute and the multiple rate cuts by major central banks this year. This could boost base metal demand, benefiting tin prices.

The physical market remained weak because downstream buyers continued to destock ahead of the end of the year. A wave of restocking is likely in the first quarter of 2020.

Supply/demand
The World Bureau of Metal Statistics (WBMS) estimates that the refined tin market was balanced in the first 10 months of 2019. Over January-October 2019:
  • Global mine production totalled 304,000 tonnes, a 4.7% increase from last year
  • Global refined production was 315,000 tonnes, a 3.4% rise from the same period of last year
  • Global refined apparent tin usage amounted to 315,000 tonnes, essentially unchanged from a year ago
The International Tin Association (ITA) has revised its fundamental forecasts - it now expects a deficit of 11,000 tonnes this year compared with a deficit of 20,000 tonnes that it previously projected.

Fastmarkets analysts project a deficit of 5,000 tonnes this year and a deeper deficit of 7,000 tonnes in 2020.

Conclusion
We expect the rebound from late August to continue over the next months, reflecting our view that refined market conditions should tighten due to weaker refined production trends and stronger demand from the semiconductor sector. Into the end of the year, however, we do not expect much from tin prices because the downstream continues to destock.

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.