Very short term (1M):   Up
Short term (3M): Up
Medium term (6M): Flat
Long term (12M): Flat
Resistances:
R1 15,690 Jan 2020 low
R2 16,077 20 DMA
R3 17,900 2020 high
Support:
S1 13,000 March 2020 low
S2 10,000 Psychological
S3 9,700 December 2008 low
Stochastics:
Bearish
Legend:

BB – Bollinger band
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
  • Follow-through selling pressure on Thursday March 19 has pushed LME tin to a fresh 2020 low of $13,000 per tonne. 
  • The price has broken past the January 2016 low of $13,085 per tonne. Some short-covering or dip-buying pressure is essential here to stave off more selling.
  • Failure to find support at this psychological price level could attract more technical sellers and potentially open up the possibility of the the December 2008 low of $9,700 per tonne being targeted (see chart). 
  • But judging by the bearish technical set-up on the monthly chart and if historical price action is any indication, the price action could replicate the 2013-2015 sell-off scenario, with a potential downside path towards the area of the December 2008 low (see chart) where the lower channel of the multi-year downward trend resides.
  • This cannot be ruled out; given the current downward direction, any rebound will remain vulnerable to another ‘sell-the-rally’ strategy.

Macro drivers
Global risk sentiment showed little sign of improvement - infection rates and death tolls from the outbreak of the deadly novel-coronavirus continue to grow across Europe and now to all 50 US states. Travel restrictions are in place and social gatherings are now banned, crippling the very essence of a normal economy. The adverse impact on social and economic activity remains very damaging but the scale and costs are unknown for now. But market participants appear to have changed their mindset from from what many saw as an impending global recession to a potential full-blown global depression similar to that of the 1930s.

While the prospect of a rapid recovery remains bleak, China remains the only bright spot - operations and movement of people are rapidly recovering. Although domestic economic activity is slowly picking up, the situation outside China is far from encouraging, with global trade and business hit hard. Exacerbating the bearish trading climate is criticism of US President Donald Trump's description of Covid-19 as the "Chinese virus," which suggests that further trade negotiations between the two economic powerhouses are unlikely to be cordial.

There is no letup yet in trade disputes between Japan and South Korea that started in July . Poor trading relations between the two countries continue to hit the semiconductors industry, reflecting the fact that Japan controls exports of three essential materials to South Korea. Worldwide sales from January 2020 were down 0.3% year on year and down 2.2% month on month according to Semiconductor Industry Association (SIA) data. Given the macroeconomic headwinds, the association concluded that any market recovery expected from 2019 is likely to be limited.

The outbreak of the deadly coronavirus has resulted in unscheduled suspensions at most base metals operations across the world; tin is no exception. Indonesian tin miner PT Timah will delay some exports of refined tin and will reduce its monthly output by 20-30% because of reduced demand, it said.

The fundamentals in refined tin have shown some resilience so far in March. Indonesian physical exchange-traded volumes, a proxy for exports, have totaled 630 tonnes so far this month after 7,370 tonnes in February and 7,280 tonnes in January. Lower shipments from the country could support tin prices. China's refined output trends are slowly returning to normal although some smelters face a concentrate shortage. On the demand side, physical premiums in Europe rose last week for the first time in 10 months.

Conclusion
The sell-off in tin corroborates our recent warning, namely the end of the low-beta regime while the LME tin market becomes increasingly illiquid while broader financial markets are in panic. It also reflects the broader negative impact from the viral outbreak and how confidence towards LME tin outlook has deteriorated fast. More supply cuts will be needed in the coming weeks/months to appease market participants and certainly vast improvements in macroeconomic conditions are badly needed to support any hope of recovery.               

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