London 27/05/2016 - Chinese exports of tin in shapes other than ingot were offered at markedly low premiums at the start of this month when there was a wide differential between LME and SHFE prices, market participants told FastMarkets.
Sources attributed the usually low premiums - of as little as $10 - to some smaller producers exporting tin in shapes that are exempt from the country's 10-percent export duty on ingot and concerns about the legality of the practice.
In contrast, premiums on 99.9-percent purity tin ingots are at $80-110 per tonne in-warehouse Singapore while low-lead ingot, with impurities below 100ppm, is at a premium of $210-260.
"We have been offered at $10-20 premiums for 100-300 ppm non-ingot tin in Singapore warehouses but only two or three containers - the volume is really small," a trading source familiar with the issue said.
LME tin prices were at a significant premium - of around $700 - to SHFE prices early in May but the gap has narrowed since Monday and is now around $300.
"When the price gap expands to more than 3,000 yuan ($457), it is worth acting," a producer in China said.
This type of trading is only profitable for non-ingot exports because tin ingot products are subject to a 10-percent export tax on ingots - this equated to around $1,690 early in May.
The attractive price differential has encouraged some Chinese tin producers to sidestep the export tax by remelting the metal into forms such as bars and billets rather than ingot before shipping, market participants claimed.
"They have very funny shapes," the trader added, referring to the products they were offered in early May.
"The 10-percent export tax is far beyond the [$10-20] premiums so it's not surprising to see the low numbers," a trader in Europe said.
But the material is failing to attract buyers despite the low premiums because of concerns over documentation - sellers are usually unable to provide Certificates of Origin (COs) in the most cases, traders and producers claimed
A CO is an international trade document attesting that goods in a particular export shipment are obtained, produced, manufactured or processed wholly in a specified country, according to the International Chamber of Commerce.
"Sellers have to show the certificates to prove that their tin products are not from conflict areas," the producer in China said.
Although some traders claimed they would not touch this material even at unusually low premiums due to concerns about the paperwork, others - including some end-users - were happy to take the risk.
"[But] overall, it's small business, not mainstream business, so we haven't seen a big impact on mainstream premiums," the trading source in Asia said.
(Editing by Mark Shaw)