Where does it come from, where does it go, and what has it been doing lately?
Answering the last question first, Cash tin rose to a record high $15.63 per pound on May 6th, with Cash to 3’s at a $1.92 backwardation at that time. On Friday, Cash settled at $15.50, while the 3 month price settled at a new high of $15.15, with the back narrowing to 35¢ per pound.
Through June, the year-to-date average stands at a record high of $12.84, up $5.07, or 65% over $7.77 during the first six months of 2020.
While tin may be the little guy in the base metals complex based on volume, it is King of the Hill in terms of price.
Attached is a summary of global production and consumption of tin, along with a breakdown of market share. As you can see, China is the largest on both sides of the equation. Over the past 20 years, production of tin in China has about doubled, while consumption rose 340%. On the supply side, with the exception of China, Indonesia and Peru, other countries saw declines in output since 2000, and all countries other than China had reduced consumption.
The United States depends on tin imports for about 75% of our requirements.
Based on statistics from the US Geological Survey, within the United States, tinplate -- that is, a plating of tin on steel -- represents the largest share of the market. And of course, with the emerging ‘green economy’ more tin will be consumed in soldering and coating of wires and fabricated components. Mining of tin in the United States ended in in 1993, with the closure of mines in Alaska, but production of tin from scrap material is an important source of metal in the domestic market. Nevertheless, the U.S. depends on imports for about 75% of our requirements.
While inventories of tin in LME warehouses have risen from the recent lows, the total held is still well below where we stood over the past two years. Further, inventories currently held represent less than one week of global consumption. And when SHFE inventories of 3,649 mt are added in, there is still no room for errors.
In other markets, the dollar rose again – not by a great deal, but it is inching closer to testing the line of resistance and previous high at 93 basis the U.S. Dollar Index. Likewise, the dollar is approaching its previous high against the Euro.
This may help to explain why silver and gold haven’t made much progress on the upside, and both are now in negative territory on a year-to-date basis. However, it does not help to explain why the 10-year yield is down again, and why the 2- and 10-year spread are narrowing further.
Crude oil failed to get through the $75 level again, and it moved further away from that gold post as it gave up
$2.75 last week to close at $71.81. Recent headlines suggest that crude may be responding to the spreading virus again, and / or OPEC + moving closer to adding to supply. We think that crude will try for the upside again.
As for copper, it is beginning to look iffy in the short term. The weekly bar chart shows copper trying to get back over $4.40 without much success, and the 10-week average is now pointing lower. If in the event copper fails to hold recent lows, we begin to think more about the 4th wave (corrective) in the Elliott wave theory.