Outlook:
Short term     
(1-3M):


Up
Medium term 
(3-6 M) :
Flat
Long term (12M): Up

Resistances:
R1 15,850 Sep 30 low
R2 16,687 20 DMA
R3 16,728 100 DMA
16,950 40 DMA
R4
R5
R6
17,372 200 DMA
17,585 Jul 2 low
Support:

S1
S2
19,150 May 7 low 
17,372 200 DMA
S3 17,585 Jul 2 low
S4 16,728 100 DMA
S5

S6
16,687 20 DMA
15,565 Aug 27 low
Stochastics:
Converging in high ground
Legend:

BB – Bollinger band
DMA - daily moving average
Fibo – Fibonacci retracement level
HSL – horizontal support line
SL – support line
MACD – moving average convergence divergence
U/DTL – up/downtrend line
H&S – head-and-shoulder pattern
RSI – relative strength index




Analysis

  • The LME three-month tin price stands above the January 30 low of $15,690 per tonne on Thursday February 13 but remains capped by the 100 DMA at $16,728 per tonne.
  • Momentum indicators risk rolling lower. The 20 DMA has crossed below the 100 DMA and the stochastics are poised to cross lower in high ground. The RSI appears more neutral and is at 46.
  • Above the 100 DMA - at $16,728 per tonne - there is resistance from the 40 DMA at $16,950 per tonne. Above this stands the 200 DMA at $17,372 per tonne ahead of the January 21 high at $17,900 per tonne.
  • Tin has pierced but so far been prevented from extending below the UTL support formed via the low from September 30/November 20, 2019, which stands at $16,874 per tonne. Further support is ahead of the low at $15,850 per tonne on September 30, 2019. 

Macro drivers
Equity markets had a negative start on Thursday February 13 following a spike in the reported death toll from the novel coronavirus (2019-nCov) in China, which reflects a change in reporting criteria.

LME tin stocks totaled 6,825 tonnes on Thursday after 540 tonnes were delivered into listed warehouses in Asia. The LME cash/three-month spread was recently in a contango of $5 per tonne, while 14.9% of stocks are booked for removal following some rewarranting.

In China, Shanghai Futures Exchange tin stocks totaled 6,995 tonnes on February 7, unchanged from the previous week.

Figures from the International Tin Association (ITA) showed China's imports of tin ore and concentrate totaled 48,200 tonnes in 2019, a fall of 14% year on year, reflecting declining ore grades in Myanmar and production cuts by Chinese smelters.

Electronics sector demand continues to slow because of macroeconomic headwinds. Global semiconductor sales dropped by 5.5% year on year in December 2019 and by 12.1% in 2019 as a whole, according to the Semiconductor Industry Association (SIA). But the latest forecasts from the Worldwide Semiconductor Market project projects sales to return to growth in 2020, which should help support tin demand for solder.

Coordinated production cuts in China and Indonesia have so far failed to re-balance the underlying fundamentals, which continue to feel the impact of slowing demand. The latest figures from the World Bureau of Metal Statistics pegged the refined tin market in a 1,500-tonne surplus in November 2019, tipping the market into a small 900-tonne surplus in January-November 2019. 

In the physical market, global premiums were little changed in the week ended on Tuesday February 12.

Meanwhile, reports suggest some Chinese steelmakers have been forced to scale back or suspend production due to logistical constraints resulting from the Wuhan coronavirus outbreak.

Tin demand faces pressure short term because Chinese authorities cut subsidies for electric vehicles and photovoltaic cells earlier in the year. But the ITA believes factors such as automation, increasing technical integration, the new 5G network and renewable energy power creation and storage are set to fuel considerable demand growth longer term.

Conclusion
Tin prices face overhead resistance while ME stock flows continue to suggest production cuts have yet to rebalance the underlying fundamentals.

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