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Tin Rises to Record in London on Concern Supply Gap May Worsen

Tin rose to a record in London on speculation that a shortfall of the metal used to make solders may worsen.

Stockpiles of tin tracked by the London Metal Exchange shrank by 39 percent in 2010, declining for a fourth year in five. Production may fall for a fourth year in 2011 as bad weather disrupts mining, PT Timah, the world’s biggest supplier, said on Jan. 14.

“Supply-and-demand fundamentals for tin are extremely positive for higher prices,” said Charles Cooper, an analyst at Oriel Securities Ltd. in London. “This will possibly trigger further investment in exchange-traded funds, and that would put further pressure on the market.”

Tin for three-month delivery climbed as high as $27,720 a metric ton on the LME. It was up $425, or 1.6 percent, at $27,400 at 12:36 p.m. local time, leading gains among the six main metals traded on the exchange. Prices may exceed $30,000 in the next six months, Cooper said.

“Tin has the best fundamentals among all the base metals,” said Nic Brown, an analyst at Natixis Commodity Markets Ltd. in London, citing a market “clearly in deficit” and “little prospect for higher supply or substitution.”

The metal was last year’s best LME performer, jumping 59 percent after production was disrupted in Indonesia, China and Africa. As much as 30,000 tons of output was lost last year, according to Cooper. Prices may reach $40,000 a ton as global supply might lag behind demand until at least 2013, Malaysia Smelting Corp. said this week.

Tin Inventories

ETF Securities Ltd. introduced the first exchange-traded product backed by tin in London last month. “This put a short-term pressure over availability of tin,” Cooper said.

Tin stockpiles tracked by the LME rose 0.2 percent to 17,295 tons today, daily exchange figures showed. Orders to draw metal from inventories, or canceled warrants, jumped 58 percent to 475 tons.

“LME tin stocks are still at a relatively low level,” enough for less than 20 days of use compared to an average of 24 days, while rising canceled warrants signal demand, Oriel’s Cooper said. “This suggests there is a shortage of stock metal.”

All of the six main LME metals advanced today as German business confidence unexpectedly climbed to a record. The Munich-based Ifo institute’s business climate index gained to 110.3 from 109.8 in December. Economists predicted the gauge would hold steady, according to the median of 41 forecasts in a Bloomberg News survey.

Copper, Aluminum

“A strong Ifo suggests a strong global economy,” said Jesper Dannesboe, a strategist at Societe Generale SA in London. “Historically there has been a close relationship between the leading Ifo survey and base metals.”

Copper for three-month delivery on the LME rose 1.1 percent to $9,457 a ton. Stockpiles monitored by the Shanghai Futures Exchange fell for the first time in four weeks, according to figures released today.

Aluminum gained 0.2 percent to $2,414 a ton and nickel climbed 1.1 percent to $26,049 a ton. Zinc added 0.9 percent to $2,350 a ton and lead advanced 1.2 percent to $2,466 a ton.

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