Following the first round a week ago, ITA conducted a second survey of Chinese companies. Most companies in the tin supply chain have resumed production following the coronavirus outbreak. Further downstream, companies are still struggling to return to work.
Upstream, most smelters in the country have resumed normal production, including Yunnan Tin (YTC). The company reported increased orders in the last week as customers look to the country’s largest smelter to ensure stable refined tin supply. According to other smelters, their inventory of tin concentrates has fallen significantly. Some Yunnan-based smelters are carrying just half a month’s production.
These inventories are unlikely to increase anytime soon. According to sources in the country, the main mining area in Myanmar is still not operating after the Spring Festival holiday. Although we expect it to resume in the next 10 days, concentrates produced after the Spring Festival will take at least another month to arrive at Gejiu smelters. Domestic mines are operating, but most smelters rely on the feed of imported material.
The first survey round revealed that the largest issue facing the tin supply chain was logistics. According to the latest results, domestic logistics have returned to normal. However, some issues remain. Air transport costs have increased 20%, while for lower-cost rail freight, transport times have increased. Downstream companies are reporting sufficient tin supply, however, given continued lower production rates.
Solder companies, the majority of which are located in Guangdong province, have mostly returned to work. However, many are still reporting lower-than-normal production rates due to a shortage of staff. Some are operating at just 50% capacity as staff who left the province must remain in isolation for two weeks.
Further down the supply chain, many companies are returning to work more cautiously. Electronics companies, in particular, have a low resumption rate, reducing solder orders. Tin chemicals companies are more badly affected; many of their end-users are in the worst-hit areas and so will take even longer to return to work. Tinplate companies are operating again, but at lower rates.
Our view: On the surface, the picture in China appears to be heading back to normality. Smelters and downstream companies are ramping up to full production once again. While the short-term supply of refined tin is stable, medium-term supply is constricted by the constrained flow of concentrates. This is unlikely to concern those further down the tin supply chain, however. Demand will likely remain low as companies remain closed. The market balance in China is likely to shift to oversupply in the short-term, although concentrate shortages may begin to reduce smelter outputs later.
