Representatives of Yunnan Tin Company (YTC) and Shanghai Futures Exchange (SHFE) presented a positive outlook for China’s tin industry at the International Tin Conference in Budapest in April. Consumption prospects are positive and better access for foreign investors in the domestic futures market is on the horizon.
Zhang Zhiyong, head of the non-ferrous metals department at SHFE, said that a market-marker system, allowing brokers to operate in the market, may be introduced to tackle the problem of inactive contracts and a low percentage of industrial clients. A new crude oil futures open to international market was listed from 26 March this year and SHFE may also fast-track the introduction of a non-ferrous metals futures market to foreign investors using a similar system of administration.
Yang Yimin, general manager of Yunnan Tin Company, suggested that a significant decline in imported tin concentrate may result in a reduction of China’s refined tin production this year, although it may be offset partly by the recovery of China’s domestic tin mining operations. Yang believed tin consumption in 2018 may show a small increase, with mid-term consumption growth prospects boosted by Chinese development policies such as One Belt One Road (OBOR).
Our view: SHFE’s efforts to improve the tin contract include increasing the usage of inactive tin contract months and the participation industrial clients, which will help the SHFE future price better reflect the China domestic spot price and make it easier for industrial participants to hedge. We also agree that China’s tin production will decline this year and believe that consumption will show modest growth. With tin exports expected to remain high and utilize excess supply, we expect the China market to be more balanced in 2018