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The price of tin has jumped to a new high, making the metal, widely used in electronic goods, the first base metal to surpass the peak it hit during the boom years before the global financial crisis.
The record comes as resurgent demand, particularly from Asia, is being met by sluggish supply in all the industrial metals, driving prices higher.
Tin for delivery in three months rose 4 per cent to hit $26,010 a tonne on the London Metal Exchange on Tuesday, powering past its previous peak of $25,500 in 2008. The metal is up 54 per cent since January, making it one of the best-performing commodities this year.
Copper, the red metal used in electrical wiring and piping, rose above $8,200 a tonne for the first time in two years, and there is widespread expectation in the industry that it will post an all-time high above $9,000 within months.
Even aluminium, the laggard of the group whose supply is plentiful, has risen 25 per cent since June and is trading near a two-year high.
The fresh price highs provide a bullish backdrop to the metal industry’s annual gathering in London next week.
Tin embodies the fundamental reasons why investors, bankers and analysts are almost universally bullish about base metals.
Supply growth is weak: the International Tin Research Institute (ITRI), an industry body, expects global tin production this year to be just 1.5 per cent higher than in 2009. Exports of refined tin from Indonesia, the world’s largest producer, are 11 per cent lower so far this year than in 2009 because of heavy rains and the closure of many small mines.
“The situation is not going to get better quickly,” said Peter Kettle at ITRI. “We don’t see any changes in terms of new mines for the next couple of years.”
Simultaneously, demand is rebounding rapidly, especially from the electronics industry, which uses tin widely in solder. Global tin consumption will rise 15 per cent this year from 2009, ITRI forecasts. Tin is also used in food packaging.
ITRI expects demand to outstrip supply by 15,000 to 20,000 tonnes this year and a similar shortfall in 2011. That compares to London Metal Exchange inventories of the metal of just 12,545 tonnes, down 53 per cent since the start of the year and equal to about 13 days of global consumption.
Stephen Briggs, base metals strategist at BNP Paribas in London, said: “Frankly, the fundamentals are so strong, especially compared with some of the other base metals, I don’t think there’s much to stop it going to $30,000.”
But he cautioned that base metals might be due for a correction in the short term following a strong rally. The price of tin is less driven by investment flows than other commodities: the market is relatively small and illiquid, and it is not a component of the main commodity indices that investors track.