(Andy Home is a Reuters columnist. The opinions expressed are his own)
LONDON, Dec 11 (Reuters) – Tin has been the best relative performer of the London Metal Exchange (LME) base metals pack so far this year. And it’s a fair bet that analysts are going to pick it again as a likely out-performer next year when the annual polls are compiled.
Against a backdrop of improving metals demand, relative price performance is increasingly a reflection of each metal’s supply dynamics. Which is why tin’s bull credentials are unarguably the strongest of the lot.
THE BULL CASE
This is a market still characterised by structural supply shortfall, unlike, say copper, where heavy investment in new mine capacity is finally closing the gap with demand.
There has been no such investment splurge in tin. Nor is there likely to be any time soon. The bull case was recently spelt out by Peter Kettle, markets manager for tin industry association ITRI.
The supply-demand deficit in the global tin market is expected to widen from 7,400 tonnes this year to 12,400 tonnes next year, in part reflecting a recovery in the electronics sector, according to ITRI.
No new mines are expected next year. Nor will there be many in the following years. Most viable projects are still 10-12 years from actual production.
Tin mining is simply too niche a proposition to attract mainstream financing, while estimated capital costs for new mines of around $30,000 per tonne will need significantly higher prices than the current $22,500.
And then there is Indonesia.
Indonesia is the largest exporter of tin to the rest of the world, giving it an effective stranglehold on the international market.
It is also a country with some of the most aggressive resource nationalism politics.
While other markets such as nickel, aluminium and copper are fearfully watching the looming January deadline for a ban on exports of unprocessed minerals, the tin market is already living with the consequences of Indonesian policy-making.
Exports of unprocessed tin were banned years ago, part of a decade-long campaign by the government to exert increasing control over its fractured and fractious tin production sector.
The journey down the long and winding value-add road has this year reached its end with the September clamp down on refined metal exports.
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