London 02/11/2016 - Australian bank Macquarie sees tin prices holding at current levels until the end of the decade, bolstered by rising demand and restricted supply of refined metal.
“Demand has turned a corner,” metals analyst Vivienne Lloyd told delegates at the bank’s LME Base Metals Outlook Summit here on Monday October 31.
Bullish trading on Tuesday November 1 lifted the LME three-month prices to a 25-month high above $20,850 per tonne, up 43% from its 2015 closing level of $14,565 per tonne.
Tin has been the best performer in the base metals so far this year, driven largely by supply constraints in key producers Indonesia, Thailand and Malaysia and also in South America.
Macquarie expects prices to rise further thanks to resurgent demand for the metal - semiconductor shipments have started to grow again in the second half of 2016 after declining earlier in the year and in 2015.
“Semiconductor production has actually lifted in a strong way this year - it’s overturned the demand weakness we saw in 2015 and that’s also helped to tighten the supplies of [available] material,” Lloyd said.
On-warrant tin availability on the LME has dropped to its lowest level since 1989, although it is widely believed that off-exchange stocks remain high.
LME stocks at 2,895 tonnes are at their lowest since June 2004 but availability on freely floating warrants is just 1,130 tonnes.
"Looking further out we believe that we're going to see a market in sustained deficits here as the semiconductor market has turned a corner and we're seeing weaker supply from the traditional bases such as Indonesia," Lloyd said.
Total refined production from the world's ten largest smelters dropped 8%, according to data from industry body ITRI.
"Tin prices are expected to be able to maintain at about $20,000 [per tonne] going towards the end of the decade," Lloyd said.
(Editing by Mark Shaw)