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The Top Factors that Move the Price of Tin


Tin, a base metal, was used in making the first ever alloy – bronze, which is an alloy of copper and tin. The metal is not easily oxidized in air, making it good for coating other metals to prevent corrosion. This is the main reason for which the metal is of great industrial importance. Like every other commodity, the price of tin varies from time to time. Many factors are responsible for the price movement of tin. However, we’ll be considering the most important price movers in this piece.

Demand outlook
Being an industrial metal, demand outlooks from different industries and from one geographic location to the other have the potential to move tin prices. Expectations of a pickup in demands usually bring about a price hike. On the other hand, expectations of a decrease in demand usually bring about a decrease in the price of tin.

Note that we call it “outlook”. So the actual increase/decrease in demand doesn’t need to have begun for a price hike/decrease to set in. In most cases, this sort of price movement is usually short-term in nature, since they are a result of instantaneous investor activities and not a reflection of changed fundamentals.

Here is a presentation of what happened.  If, for instance, news come out that the solder industry, which consumed about 57% of tin in 2011, would demand less tin in a given year or quarter, there would be a sudden fear in the market that the tin market could experience a surplus. And since surplus supplies usually result in lower prices, traders would make panicky moves to protect themselves from the impending – albeit theoretical – decline in the price of tin. This causes an immediate response from the market in an attempt to make the entire system a balanced one. Therefore, traders want to keep tabs on demand outlooks from leading tin consuming industries to help determine the direction that tin would head to some extent. The table below shows the industries you want to watch.

Industry consumption of tin in 2011

Market Sector

%

Solder

52

Tinplate

17

Chemicals

15

Brass & Bronze

5

Glass

2

Others

10

Source: London Metal Exchange

Supply outlook
Just as demand outlooks do move the price of tin, supply outlooks also move the price of tin. The relationship here is opposite that of demand outlook. In general, expectations or predictions of a slump in global supplies of tin usually lead to an immediate increase in the price of tin. On the other hand, expectations of an increase in global supplies of tin usually lead to a decline in the price of tin.

Again, just the outlook is enough to cause immediate change in the price of tin. The market might balance up later. However, there is usually that first adjustment to market news. You know, expectations of an increase or decrease in supply mean that there is a potential for either surplus or deficit. So investors usually move to profit from the potential outcome, which makes the market move prices up or down – in the near term. Therefore, it is always wise to consider the supply outlook of tin every time you want to lock into tin futures. Here, you want to watch supply outlook from geographic locations that produce large volume of tin. The table below provides a basic guide regarding where to look.

2011 World tin production by continent

Region

Percentage

Asia

83%

America

14%

Europe

3%

Africa

0%

Source: London Metal Exchange

Economic outlook
What analysts say about the state of the economy also drive tin prices on the short-term. As with every other industrial metal, there is a positive relationship between the price of ten and the state of the economy. Tin prices tend to be high during stable economic environment, as it usually means that demand from industries would be stable. However, in turbulent economies, tin prices are usually on the low side, as productions stall due to the bad economy.

Therefore, with a view of what different economic conditions could mean, when predictions come out, traders react to them immediately. The market then reacts to the sudden activities by caging the value of tin. Such change in the direction of tin could last anything from a few hours to a couple of months. However, the changes are usually short-term, as they do not represent a change in the fundamentals of tin most of the time. 

Inventory level
If you’ve been following the commodity market quite well, you might have heard or read that analysts lay so much emphasis on deficit. For instance, at the start of 2014, many analysts predicted that tin prices would be up, owing to the fact that the tin market is in deficit. While, tin prices didn’t go up as predicted, they were right to have made such prediction since such relationship has been seen many times in the past. As a tin trader, you want to keep tabs on what reputable analysts say about tin stocks. Most of the times, the higher the predicted deficit – or the actual deficit – the higher the chances that tin prices would go up.

Indonesia wildcard
Events in Indonesia have also had influence on tin prices in the past. The main reason for this is that Indonesia accounts for a large portion of global tin production. And the fact that this nation has had to deal with issues like earthquakes monsoons and so on could make tin prices quite volatile. Moreover, decisions made by the government regarding the tin industries can also affect the price of tin. For instance, Bloomberg reported that, “the country closed about 70 percent of the smelter capacity in Bangka-Belitung province, its main tin-producing region, after prices slipped as low as $18,740” in the summer of 2012 And as reported by Tin Investing News, this move helped incite a rebound in the second half  of 2012. This shows just how important events in Indonesia are to the tin market.

Overall, as a tin trader, you should note that these factors don’t always have the effect that we discussed here. If nothing else, this is obvious with the deficit predictions. In fact, up until the time of writing, tin has been unable to trade above $24,000 per metric ton, according to Metal Miner. At times, deviations result from other factors – or the resultant effect of multiple factors – outweighing the effect of the focus factor. It could also be that the market movement was not sufficient to justify a change in valuations. Therefore, savvy traders want to look in different directions when predicting the price of tin.

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