Despite significant falls in tin consumption earlier in the year, demand for the metal in China has recovered well. In fact, with smelters including Yunnan Tin closed for maintenance over the June-July period, the country imported large amounts of refined tin.
However, the major smelters have now resumed production and demand is still slightly below usual levels. This has closed the LME-SHFE arbitrage, making importing tin less attractive to traders. As a result, imports of tin fell 87% month-on-month (MoM) to just 348 tonnes. This is the lowest total since November 2019. In fact, the country became a net exporter in August 2020, with exports some 325 tonnes higher than incoming material. This situation has not occurred since October 2019, when smelters in the country cut a significant proportion of output.
The recovery in tin demand has been relatively strong in recent months. Industrial production in China is now back to pre-COVID levels, while tin-specific indicators – such as communication equipment sales – are up 25% year-on-year (YoY). With Chinese demand expected to generally continue its recovery, smelters in the country will need to match production. However, that may become a challenge. Myanmar is still struggling to consistently deliver tin concentrate shipments at levels seen over the last few years.
Earlier in the year, the Myanmar-China border had strict COVID restrictions, slowing exports. Now, more than half of Myanmar’s mines are flooded. As a result, just 1,900 tonnes of tin-in-concentrate were imported into China from Myanmar in August, down 45% MoM and 36% YoY.
Our view: We expect the situation in Myanmar to continue throughout September and October, which could put pressure on raw materials supply in the country. This in turn is likely to see increasing imports of refined tin or a draw down of stocks on the Shanghai Futures Exchange. Stocks held in Shanghai have already begun falling, with warranted stocks falling by over 20% in the last two weeks.