Nov 08 2024 39 mins
Recording date: 7th November 2024
The often overlooked tin market is poised for a potential supply crunch in the coming years as strong demand from the electronics and electric vehicle sectors collides with increasing disruption risks from dominant producers Myanmar and Indonesia.
Over half of global tin consumption goes into soldering for circuit boards and semiconductors, making it a direct play on the rapid growth of 5G smartphones, IoT devices, data centers, renewable energy and electric vehicles. The ongoing boom in these technologies is set to underpin healthy tin demand through the late 2020s. As Andy Home, Senior Metals Columnist at Reuters, explains, tin is "the metal that holds - that glues - the internet together."
However, the tin market faces major near-term supply risks due to the shutdown of Myanmar's Man Maw mine, which accounts for 7% of worldwide output. The mine was ordered to suspend operations in August 2022 by the United Wa State Army, one of Myanmar's largest ethnic militias, and there is no timeline for when production will resume. The disruptions have caused Chinese tin concentrate imports from Myanmar to collapse over 90% year-to-date.
"Our best gauge of what's going on, since we don't get any production figures, is to look at how much raw material China is importing from its neighbor. That tells me that whatever is going on there, no one's actually mining again," Home states. The longer the Myanmar shutdowns persist, the more likely it is that tin prices react to the loss of supply as Chinese smelters face "genuine distress" and are forced to cut production.
The other key supply risk is Indonesia's ambitions to ban exports of tin and other unprocessed metals, emulating its success in nickel. As the world's largest shipper of refined tin, any restrictions on Indonesian cargoes could significantly tighten the global market. However, tin faces unique challenges in trying to force electronics and semiconductor firms to invest downstream in Indonesia compared to nickel's more straightforward stainless steel supply chain.
While near-term supply risks remain elevated, tin also has a bullish long-term fundamental outlook. The pipeline of new tin mines is limited and over 80% of global reserves are controlled by just five countries - China, Indonesia, Peru, Bolivia, and Brazil. The surging demand from electronics, EVs and renewable energy could leave the tin market facing structural deficits by the end of the decade.
For investors looking to gain exposure to these tin dynamics, the options are buying physically-backed tin ETFs, shares of major listed producers like Yunnan Tin and Malaysia Smelting Corp, or investing in diversified miners with some tin output like Rio Tinto and Glencore. When allocating to tin equities or futures, it's key to have a multi-year time horizon and be prepared for volatility given the small size of the market at just 400,000 tons annually.
The critical applications, Myanmar disruptions and Indonesian export policy risks mean tin could fly under the radar to be one of the best performing metals of the coming years. As Home concludes, "If you want to know why tin's outperformed on the futures markets this year, it's that - that's the risk premium. Everyone knows there's a problem here, and we all know that we have no idea when the problem's going to be resolved."
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