- Available tin in LME-tracked warehouses at lowest since 2004
- Fee to borrow metal for a day reached highest in a year
A bull controlling the tin market and a lack of metal is causing pain for bears.
Traders had to pay the most in a year to maintain bearish positions amid a squeeze caused by tightly held supplies on the London Metal Exchange. One unidentified company controls at least 90 percent of tin stockpiles and short-dated positions, and the amount available for withdrawal from warehouses is at a 12-year low, the latest exchange data show.
Tin, the second-best performer on the LME this year, is trading near a 19-month high as slowing shipments from top exporter Indonesia and recent maintenance shutdowns at Chinese smelters add to signs of restricted supply. It’s unusual for traders to scramble to buy metal so early in the month because they normally wait until closer to the third Wednesday, when positions have to be settled, according to Sucden Financial Ltd.
“The market is squeezed,” Steve Hardcastle, Sucden’s head of industrial commodities client services in London, said by phone. “There are some vulnerable shorts and they have been covering in a market with a very low volume. It happens easily in a market with such low stocks. I suspect it may get worse.”
The tom-next spread, a measure of how much it costs to borrow tin for one day, reached $40 a ton on Tuesday, the highest since August 2015. The fee shifted into a discount of 75 cents today.
Tin has surged 34 percent this year to $19,565 a ton. The metal, used in electronic solders, is the least-traded contract among the LME’s six main metals. Futures and options trading accounted for less than 5 percent of the amount of copper that changed hands last year, exchange data show.
Tin available to book for withdrawal from LME-monitored warehouses, known as on-warrant, plunged 54 percent since mid-May. Most of the inventory is held in Malaysia. With fewer supplies for traders, metal for immediate delivery is becoming a lot more expensive than later-dated contracts. Spot metal cost $210 a ton more than the benchmark three-month contract on Wednesday after reaching $250 yesterday, the most in almost a year.
Just one company is controlling the lion’s share of the market. The firm held at least 90 percent of stockpiles and short-dated positions as of Monday, LME data show. The world’s biggest metals bourse requires those holding more than 50 percent to lend metal at fixed rates. The exchange doesn’t disclose the identity of dominant holders.