Due to a tight concentrate market and low profit margins, Chinese smelters are planning to reduce their production of by around 10%.

The Chinese concentrate market has been increasingly tight throughout 2019, caused in part by lower domestic output after the closure of the Baiyinchagan mine and by the reduced inflow of raw materials from Myanmar. Imports of concentrate from the neighbouring country have fallen by almost 30% during the first half of 2019 compared to the same period last year.

As a result of the market conditions, Chinese smelters have already reduced their treatment charges by 20% in order to encourage deliveries of raw materials. Combined with the recent low prices on the LME and SHFE, which fell by 28% between their peak in late February and a six-year low on 27 August, profits at these smelters are reportedly pressured in the current market environment. As a result, 14 Chinese smelters (including Yunnan Tin) agreed to reduce production by 20,000 tonnes, compared to 2018.

Our view: Chinese refined tin production in the first half of the year fell by 8% YoY. While the maximum change in annual production could be 20,000 tonnes, higher tin prices might prompt some recovery in the tin concentrate market and increase the availability of raw materials to smelters once again. It remains to be seen, therefore, whether the full extent of these cuts will be realised in practice.