Tin consumption and output in China, the biggest user, will rebound next year after an economic slowdown lowered demand and kept smelters reluctant to produce, according to industry group ITRI Ltd.
Consumption will gain 4 percent to 152,000 metric tons in 2013 after falling 5 percent this year, Cui Lin, chief representative in China, said from Beijing yesterday. The country used a record 154,000 tons in 2011. Output will match the all-time high in 2011 at about 160,000 tons after dipping to 152,000 tons this year, she said.
Tin has jumped 22 percent this year, the best performer among six metals on the London Metal Exchange. Rising demand in China, coupled with supply constraints from the largest exporter Indonesia, should bolster prices and draw down Chinese inventories. China accounts for about 43 percent of global usage of the metal used to make cans and electronics, according to St. Albans, England-based ITRI.
“Tin has a big chance to perform better next year,” said Wu Xiaofeng, an analyst at data provider SMM Information & Technology Co. “Improving demand from China is likely to play a major role in supporting prices.”
Tin for delivery in three months on the LME climbed as much as 0.6 percent to $23,450 a ton, the highest level in eight months. The consumption estimate for this year is lower than ITRI and CRU International Ltd.’s 147,900-ton forecast in August.
Tin chemical was the only product that witnessed growth this year, as demand from soldering and tinplate declined, leading to the biggest yearly drop in China’s tin consumption since 2008, Cui said, citing the company’s survey findings. The country’s gross domestic product gained 7.4 percent in the third quarter, the slowest since the first quarter of 2009.
Tin chemical is likely to have strong growth potential, while tinplate use may expand along with China’s focus on domestic consumption, according to Cui.
“A slowdown in the electronics industry and the trend of electronic miniaturization will curb demand in this sector,” she said. “Soldering demand may slow to 4 to 5 percent growth a year from over 10 percent in the past.”
Soldering accounted for about 65 percent of China’s total usage last year, while tin chemical and tinplate were at 15 percent and 10 percent, according to ITRI.
A drop in demand has led to an increase of Chinese inventories by 17,000 tons, the biggest advance in at least a decade, ITRI’s calculations showed. Imports of unwrought tin jumped 65 percent from a year ago to 26,273 tons in the first 10 months, with shipments from Indonesia accounting for 49 percent, according to China’s customs department.
“Plenty of arbitrage opportunities fueled the imports,” Cui said. “Next year, as demand rebounds and supplies from Indonesia are curbed, we expect domestic inventories to fall.” Arbitrage traders make profits by buying the metal in London and selling in Shanghai.
Indonesia banned exports of some mineral ores starting in May, except for mining business license holders that plan to build local processing plants. Those shipments are subject to a 20 percent tax, according to government regulations.