Last updated: August 5, 2010 10:27 pm

Tin pushes past $20,000 per tonne barrier

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Tin prices hit a two-year high above $20,000 a tonne on Thursday amid tight supplies across the base metals complex.

Inventories of the metal, which is used for soldering in electronics, have fallen nearly 50 per cent this year on the London Metal Exchange.

Falling production in Indonesia, the world’s largest producer, has come as consumption in Japan and Europe rebounds as manufacturing and electronic sectors increase output after the crisis.

The price of tin for delivery in three months rose 2.6 per cent to a peak of $20,750 a tonne on the LME on Thursday, the highest level since August 2008. The metal has risen more than 30 per cent in two months.

The tightness in the tin market is mirrored in other base metals. They have risen to their highest levels in three months on the London Metal Exchange as mine production of everything from copper, used in electrical wiring, to nickel, used in stainless steel production, has lagged behind rebounding demand.

David Wilson, metals analyst at Société Générale in London, said that falling ore grades had created tighter conditions in the metal markets.

“It’s an issue that miners are increasingly facing. It’s an issue for all metals,” he said.

At the same time, demand is rebounding, even through the traditionally slow summer period. Germany’s manufacturing sector on Thursday surprised analysts by reporting a higher than expected 3.2 per cent rise in factory orders in June.

The price of copper has risen more than 20 per cent since early June, hitting a three-month peak above $7,500 a tonne on Wednesday. On Thursday the red metal slipped 1.3 per cent to $7,387 a tonne. Among the other metals, aluminium has risen above $2,200 a tonne; lead has hit $2,250 a tonne; and nickel is above $21,500.

The LME’s index of metal prices, which tracks the six base metals traded on the exchange, has risen to its highest level since April, erasing almost all of the losses suffered when fears about the eurozone debt crisis gripped global markets.

Xiao Fu, metals analyst at Deutsche Bank, said the “impressive rally” in base metals had been “supported by funds opening new longs as well as short covering”.

The price of iron ore, the key industrial commodity used in steelmaking, was also higher. Spot benchmark Australian iron ore – 62 per cent iron content – was up 0.5 per cent at $143.60 a tonne. That is a 22 per cent rebound since its recent lows in mid-July.

Melinda Moore, commodities analyst at Credit Suisse, said she expected spot prices to rally to $160 a tonne before retracing back to current levels. “China’s post-summer restock rally across the steel complex is under way, ridding itself of all the second quarter’s macro and overcapacity demand destruction blues which had plagued not only China, but the global industry since mid-April.”

Elsewhere, oil prices dipped. Nymex September West Texas Intermediate was down 46 cents at $82.01 a barrel, while ICE September Brent dropped 59 cents to $81.61 a barrel.

Gold was in consolidation mode following its bounce above $1,200 an ounce the previous day. Spot bullion gained 0.2 per cent to $1,196.90 an ounce.

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