domestic prices have soared by more than 20% in the past 10 days. The big differential which had emerged between prices on the () and encouraged arbitrage buying on SHFE, forcing covering of speculative short positions. The trading volume of the SHFE tin contracts expanded substantially as prices surged. The rally in tin futures price also pushed the physical tin market spot price to rise. The price of spot tin ingot recovered to RMB 100,000 yuan (USD 15,455, including VAT) yesterday, up from a low of only RMB 83,000 yuan (USD 12,828, including VAT) 10 days ago.

Apart from the arbitrage trading effect, recent changes in the structure of China domestic tin supply was also an important reason of the price rise. Local sources estimate that more than 2,000t of tin ingot and products were exported in late November and early December because the China price was much lower than the . At the same time, tin raw material supplies are reported to be very tight. Although the imports of tin concentrate hit a record level in November, mine production in China has reduced greatly. Most private mines in have been closed and some of ’s high cost operations have also been closed recently. The Southern Mines operations in Hunan, the third largest tin mining company in China, have been closed from June until now because of environmental problems. We estimate that the reduction of China mine production will exceed 10,000 tonnes in 2015.

Chinese smelters continue to rely heavily on imported tin concentrates as raw material. China imported 38,150t tin concentrate (gross weight) in November, up by 32% year on year. The total imports in January to November were more than 247,000t, and estimated to contain around 40,000t tin. Most of this was from Myanmar. However, the increase in imported raw material supply does not offset the reduction of China mine production and local scrap supply.

Many smelters reduced production and stocks of both raw materials and in November in response to the falling tin price. At a number of companies the cuts have also been accompanied by reductions in staff numbers. Although prices have now recovered, we do not expect to see any immediate supply response.