There’s a tingle of excitement in the tin market.
It helps that the metal has weathered COVID-19 relatively well. At a current $18,300 per tonne, the London Metal Exchange (LME) price is up 6.5% on the start of 2020 and nudging against September’s one-year high of $18,510.
It also helps that sentiment among the small number of analysts who cover the tin market is turning bullish based on anticipated supply deficits over the coming years.
However, underpinning the rosy market outlook is also a more fundamental reappraisal of tin’s role in what’s dubbed the Fourth Industrial Revolution - the coming whirlwind of machine-to-machine communication, the internet of things and artificial intelligence.
Tin is classified as a critical mineral in the United States, but not in the European Union.
The potentially more significant question though, is what China thinks about the metal. If the world’s largest producer decides to start stockpiling tin, it’ll be a wake-up call for everyone else.
GLUE FOR THE INTERNET
Tin doesn’t grab many headlines.
The common association is with the humble tin can - the clue’s in the name - a sector that has been in long-term decline as steel-makers use ever thinner coatings and the packaging sector shifts towards alternative materials such as aluminum.
It’s not the sort of story to catch the attention of fund managers. Heavy-weight investors are also put off by the small size of the market - annual global production is just 360,000 tonnes - and the even smaller size of the LME market.
The lack of institutional interest is why relatively few analysts even bother with the tin market. Thirteen contributed a tin forecast for Reuters year-start metal analysts poll, compared with 28 for copper.
However, tin usage has, over several decades, quietly evolved away from long-life food to nano-soldering in electronics.
Soldering accounted for 48% of global usage in 2018, while tinplate packaging was just 13%, according to the International Tin Association (ITA).
Tellingly, demand for tinplate fell 2% that year, while soldering usage increased by the same amount.
This linkage to the electronics sector has been a boon for tin this year.
Semiconductor sales, a broad proxy for the electronic goods sector, have been resilient, up 4.9% in July relative to 2019, according to the Semiconductor Industry Association.
Lockdown, perhaps unsurprisingly, has boosted demand for electronic gadgets.
But soldering will also drive increased tin demand as the world tools up for the Industrial Revolution Version 4.
Tin is literally the glue that binds together the machines needed to interface with the virtual and robotic worlds.
When Rio Tinto commissioned the Massachusetts Institute of Technology to study which metals would gain most from “new technology,” the answer was tin.
MIT saw the “can metal” benefitting from all four megatrends of electric vehicles, renewable energy, advanced robotics and advanced computation and IT.
CRITICAL METAL?
Tin’s usage across such a wide modern manufacturing spectrum is what put it on the U.S. list of critical minerals.
The reason it’s not on the European list - a rare divergence - is probably because the European Union has a significant domestic producer in the form of Belgium’s Metallo, now part of Germany’s Aurubis.
The last U.S. tin mine, by contrast, closed in 1993 and the last smelter even earlier in 1989.
Home-grown supply is limited to around 11,000 tonnes of recycled metal, with refined tin imports running at around 35,000 tonnes in the last two years, according to the United States Geological Survey.
Is it on China’s list of strategic reserves?
The country is expected to include a stockpiling program for strategic commodities in its next five-year plan beginning 2021.
State stockpile managers have already been active in the cobalt market.
There is much speculation they are one of the reasons China’s copper imports are running red-hot this year.
Given both China’s existing manufacturing base and its drive to dominate next-generation technology, tin is a likely contender for strategic metal status.
FRAGILE SUPPLY
China has been the world’s largest producer and consumer of tin for some years.
If lack of domestic resource is a key determinant of a metal’s criticality, the country doesn’t appear to have a problem.
But China has grown heavily reliant on imports of raw material from the tin mines in the Wa area of Myanmar.
Imports peaked at over 470,000 tonnes bulk weight in 2016 but have been trending ever lower since amid speculation that easily accessible reserves are being exhausted.
This year has brought another sharp decline, due first to COVID-19 restrictions at the China-Myanmar border and more recently, the ITA says, to severe flooding at some of the mines.
Smelters such as Yunnan Tin have taken maintenance downtime to compensate for the shortfall of raw material.
That in turn has caused the world’s largest producer to turn net importer of refined tin so far this year.