Malaysian tin miner and smelter Malaysian Smelting Corporation Bhd (MSC) expects the tin market to be challenged for the rest of the year due to weak demand on the back of the prolonged trade tensions between the US and China.

The comment from CEO Datuk Dr Patrick Yong came as the group posted lower revenue for the third quarter of 2019 due to lower sales of refined tin. “We see softer demand for tin solder, resulting in a build-up in tin inventories which could lead to a decline in tin prices”, he said in a statement yesterday (11 November). LME stocks currently sit at 5,720 tonnes on warrant, having risen from just 740 tonnes on warrant at the end of January. Demand for tin in solders this year is expected to decline by roughly 2% according to market participants.

Rahman Hydraulic Tin mine

Although the company will begin operating its new ISASMELT furnace in early 2020, following now-underway testing and commissioning, it will operate the new furnace alongside its current Butterworth furnace, with only the latter generating revenue. MSC are likely to see profits increase once commissioning of the new ISASMELT furnace is completed due to the lower operating costs and losses, along with higher recovery yields associated with the new smelting technology. In the meantime, the company generates much of its profits from its tin mining sector, which it is currently working on improving. The company plans to increase the daily mining output at its Rahman Hydraulic mine, while mining is expected to begin at its new mine in Sungai Lembing, Pahang in the short-term. The company is also exploring potential joint venture mining agreements to expand its mining activities.

Our view: While LME stocks have been rising, tin stocks on the Shanghai exchange (SHFE) have been falling from a peak of 8,660 tonnes in March. SHFE stocks now sit at 4,413 tonnes – a 49% decline – almost cancelling out the rise in LME stocks. Meanwhile, global consumer stocks are also estimated to be falling. It is likely that once planned production cuts begin to impact the market, these stocks will begin to fall more rapidly.

On solder demand, there are some signs of improvement – Chinese white goods production, for example, has been growing consistently at around 5% this year after having declined by around 10% in 2018 compared to 2017. Longer-term, we are very positive on solder demand related to new opportunities in 5G, computing and electric vehicles.