Tin Seen by Morgan Stanley as Best Base Metal Pick for 2014
Tin is the top base metal pick for 2014 as increasing global demand outstrips supply, according to Morgan Stanley, which highlighted a decline in inventories and China’s role as a net importer.
“You’ve got recovering electronic demand for lead-free solder, you’ve got substantial reduction in inventory that’s taken place over the course of this year,” said Peter Richardson, Melbourne-based chief metals economist. “China is no longer self-sufficient in refined- or mined-tin production.”
Tin outperformed the five other main base metals traded on the London Metal Exchange this year as Indonesia imposed export curbs, exacerbating a global deficit. The rule changes in the world’s largest exporter have been highly disruptive for local producers, according to Richardson, who’s studied the tin market since 1987. Higher prices will increase costs for makers of electronics and packaging.
“It’s one of the few commodities where China’s gone from having a surplus that it exports to the world, to one where it imports,” Richardson said in an interview in Singapore on Nov. 15. “That import dependence is getting bigger as the Chinese tin-mine reserves run down.”
Tin for immediate delivery will average $22,845 a ton next year, Morgan Stanley said in a report on Oct. 7 in an outlook affirmed by Richardson. That compares with $22,203 on the LME so far this year, according to data compiled by Bloomberg. Three-month tin, which was at $22,900 at 3:59 p.m. in Singapore, declined 2.1 percent this year, less than losses in nickel, aluminum, copper, lead and zinc.
A Macquarie Group Ltd. survey of more than 325 people at this year’s LME Week, held in London last month, listed tin as the respondents’ favorite so-called long position, along with lead. A long position is a bet on price gains.
Global demand will exceed supply through 2016, according to Morgan Stanley, which predicts a deficit of 100 metric tons next year after a 1,600-ton shortfall this year. China, the largest user and producer, has turned to importing metal as domestic mine reserves deplete, according to Richardson.
Indonesia limited exports of refined metal to tin traded through local exchanges on Aug. 30 in a bid to displace the LME as the venue for setting benchmark prices. Stockpiles tracked by the LME dropped to 11,555 tons on Nov. 15, the lowest level since December, according to bourse data. Canceled warrants, or orders to remove metal from warehouses, now account for 46 percent of reserves, the highest proportion since October 2012.
“Unlike all of the other base metals, when the price goes down, production goes down,” Richardson said. “That’s what makes tin highly unusual is its price elasticity of supply as well as demand, and that’s quite an attractive feature.”
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