Tin beats all metals on fourth year of shortages

LONDON: Indonesia, the biggest tin supplier, is poised to ship the least metal in a decade, extending shortages into a fourth year at a time when surpluses are emerging for most other industrial metals.

Sales will drop 24% to 75,000 tonnes because most smelters won’t meet a higher purity standard that starts in July and ore reserves are diminishing, according to the median of 13 exporter and analyst estimates compiled by Bloomberg. Prices will rise 17% to US$28,750 a tonne on the London Metal Exchange this year, the median of 14 forecasts shows.

Tin climbed 22% in 2012, more than any other LME metal, after supply

Most of the smelters are not ready to comply with the new limit. — HIDAYAT ARSANI

contracted the most since at least 2005. Morgan Stanley raised its estimate for this year’s shortage four-fold since October and RK Capital Management LLP, which manages US$3bil of assets, said tin was its top pick among base metals. Indonesia is raising purity standards so it can sell directly to electronics companies rather than refiners outside the country.

“Most of the smelters are not ready to comply with the new limit,” said Hidayat Arsani, president of the Indonesian Tin Mining Association, which has 30 members. “It’s unlikely that all of them will upgrade on time. It won’t be easy to get the technology installed and to find the people to operate it.”

The metal is leading gains this year, rising 4.7% to US$24,500 as the LMEX index of six industrial metals advanced 1.2%. Tin gained 0.4% yesterday, rebounding from the lowest close in two weeks. The Standard & Poor’s GSCI gauge of 24 raw materials has added 3.1% this year and the MSCI AllCountry World Index of equities jumped 4.5%. Treasuries lost 1%, a Bank of America Corp index shows.

Global demand for the metal used in solder and packaging will reach about 361,000 tonnes in 2013, compared with supply of around 357,000 tonnes, Morgan Stanley estimates. The projected 3,500-tonne shortfall compares with an October estimate of about 800 tonnes, according to bank data. Orders for stockpiles in LME- tracked warehouses are 47% higher than a year ago, bourse data show. The tin market was valued at US$7.2bil last year based on consumption and the average LME three-month price.

Sales of consumer electronics will rise 4% to US$1.1 trillion this year, according to GfK Digital World and the Arlington, Virginia-based Consumer Electronics Association. A mobile phone contains about 0.7 gramme of tin and a tablet computer as much as 3 grammes, data from St Albans, England-based ITRI and Henkel AG, a Dusseldorf-based solder producer, show.

The rally is boosting profit for PT Timah, Indonesia’s largest producer, which has said it is preparing for the new rule raising export purity standards to 99.9% from 99.85%. The Pangkalpinang-based company will report a 29% gain in net income to 677.7 billion rupiah (US$70.2mil) this year, according to the mean of 12 estimates compiled by Bloomberg. — Bloomberg