Tin prices have fallen to their lowest levels in more than a year since the end of June, after retreating by more than 50% from their March record highs. The tin contract traded on the London Metal Exchange (LME) dropped 22% in the week to 24 June – its largest weekly fall since at least 2005.
What has been driving the volatility on the market this year, from March’s highs to the latest drop? Why is tin important as a commodity?
In this article, we take a look at the tin market and the latest tin price predictions from analysts.
Who needs tin anyway?
What is tin used for? Before aluminium cans became commonly used, steel cans coated in a tin-brass alloy were used for food and drinks packaging. Tin is still used to make cans, but recycling is reducing demand as part of decarbonisation efforts to tackle climate change, while other applications are growing.
Tin is an important component for soldering electronics including semiconductors, solar panels and batteries, for which demand is expected to grow in the coming years. The rollout of 5G telecom networks is increasing demand for tin soldering in new telecom equipment. Electronics systems in electric vehicles (EVs) are another growing source of demand. Automotive manufacturers use tin in coatings, bearings and brake pads as well as batteries.
While tin is a key metal for technologies that aim to limit climate change, the market for the metal is much smaller and has less trading liquidity than other base metal markets such as copper and aluminium. That means smaller changes in buying or selling demand from a few market participants can have an outsized impact on prices. This volatility creates opportunities for traders but also presents the risk of sharp price falls.
Historical tin price performance: the recap
Tin prices on the London Metal Exchange soared by almost 90% in 2021, its largest annual increase since the LME relaunched trading of the metal in 1989. Trading was halted for a four-year period starting in 1985 following the collapse of the International Tin Council. The council caused a price crash on the market after it ran out of funds while attempting to stabilise prices by buying low and selling high with a buffer stock of tin.
With the importance of tin in key growth industries, prices tend to follow broader global economic trends as well as demand and supply.
The commodity’s value climbed from around $10,000 per tonne during the 2008 financial crisis to highs above $30,000 in 2011 as the global economy recovered. By 2015, it had briefly dropped back below $14,000, as abundant supply and weak demand weighed on buying interest. The market rebounded to the $22,000 level in 2018 in response to supply shortages and weakness in the US dollar.
Tin demand decreased in 2019, in part because of lower demand for semiconductors as a consequence of trade wars. And with the impact of the Covid-19 pandemic on global trade, tin prices dropped to around $13,400 per tonne in March 2020. The market then began to rebound as the automotive, electronics and solar equipment industries all recovered rapidly and entered new phases of growth, while supply chain disruptions and soaring freight costs reduced the availability of tin.
The three-month tin contract on the LME started 2021 at $20,735 per tonne and had climbed to $39,100 by the end of the year, outperforming other industrial metals.
Tin stocks in LME-registered warehouses dropped to their lowest levels since 1989 in early November 2021, as demand outpaced supply from the world’s largest producers. Chinese producers faced restrictions to their electricity supply. Covid-19 restrictions and political unrest affected ore exports from Myanmar. Lockdowns shut production in Malaysia in the second half of the year. Indonesia also saw disruptions.
Tin prices continued to rally heading to 2022, reaching record highs in March when the LME cash contract briefly touched $50,000 per tonne on 8 March as commodities markets reacted to uncertainty caused by Russia’s invasion of Ukraine and its potential impact on global supply chains.
Prices have since retreated to around $27,000 per tonne on a combination of profit taking, concerns about the impact of renewed Covid-19 lockdowns in China on demand and expectations that high inflation and rapidly rising interest rates will slow the global economy.
What is the outlook for the tin market for the rest of 2022 and beyond?
Tin price forecast: Will the market return to its highs?
On 30 June, James Willoughby, market analyst at International Tin Association, commented on the latest price drop: “Tin prices hit new lows for the year in the last week on the back of further macro negativity. While the spot market for tin remains quiet, consumption remains relatively strong with long-term contracts performing well.
Analysts at Sucden Financial expect continued weakness in demand in their tin price forecast. They wrote in their quarterly market analysis: “Outside of solder demand from semiconductors, tin consumption is weak in consumer-led sectors. With living costs rising, end-user demand for home appliances such as air conditioners, fridges, TVs, and computers have been softening. We expect demand to remain weak in the near term, following COVID-19 and its lockdown wave of consumption and lower disposable income from the consumer.” Although they noted that “the long-term trend for tin is positive due to solar panels and EVs.”
“Indonesian exports have been increasing in recent months; this is in line with our view from our previous report that tin supply is improving, putting pressure on the spreads and 3-month prices,” the Sucden analysts added.
Analysts at Fitch Solutions have maintained their bullish tin price forecast for 2022 at $42,000 per tonne, dropping to $38,000 per tonne in 2023. The analysts cited “weakening Chinese demand as a result of the country's strict lockdowns work to undo most of the price gains made following the Ukraine war”.
The Fitch analysts expect tin prices to continue trending higher over the long term with demand outpacing supply. They have previously issued a tin price forecast for 2030 of $35,500 per tonne.
At the time of writing (5 July), the tin price forecast from Trading Economics showed the potential for prices to drop further, from $25,874 per tonne at the end of the current quarter to $23,681.19 in 12-month time.
Algorithm-based forecasting website Wallet Investor was bullish in its long-term outlook for the market, with its tin price forecast for 2025 reaching $74,356 per tonne by the end of the year, up from $34,904 at the end of 2022.
When considering any tin price forecast, it’s important to keep in mind that commodity prices are highly volatile, especially illiquid markets like tin, making it difficult to accurately predict where prices will be at any given time in the future. You should do your own research. Remember that past performance does not guarantee future returns. And never invest money that you cannot afford to lose.
Is tin a good investment?
Whether tin is a good fit for your portfolio depends on your risk tolerance,investing strategy and portfolio composition, among other factors. You should do your own research. And never invest money that you cannot afford to lose.
Will tin prices go up or down?
At the time of writing, some forecasts indicated that tin prices could rise in the future, while others expected the market to fall. This emphasises the importance of doing your own research to take a view of the market. Always keep in mind that analysts can and do get their predictions wrong.
Should I invest in tin?
You should do your own research on the tin market based on your personal circumstances and investing strategy to decide whether or not to invest in the commodity. Keep in mind that past performance is no guarantee of future returns. And never invest what you cannot afford to lose.