Changing Global Trends in the Tin Market

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The global tin market is experiencing significant shifts, exemplified by price comparisons with other LME metals, critical statistics revealing forecast errors in 2014, and the growth trend in global tin consumption. Stakeholders are facing challenges as downsizing concerns arise, while unexpected changes in production outputs in countries like China and Indonesia impact supply dynamics. Despite fluctuations, the tin market remains dynamic and unpredictable, influencing various stakeholders worldwide.

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  1. A Changing Global Tin Market May 29, 2015 Cui Lin Chief Representative of International Tin Research Institute in China

  2. Price comparison between tin and other LME metals Comparison of price between April 2015 and April 2014 Tin Zinc Zinc Aluminum Aluminium Index Lead Lead Copper Copper LME Nickel Nickel LME and tin price index (2000 =100) Tin Tin -40% -30% -20% -10% 0% 10%

  3. Moves in trend and the confusions! Tin has ever been one of the most popular LME metals, but now tin price has the worst performance Downsizing becomes the biggest concern of stakeholders for the tin market, but the tin consumption recovered slightly in the last two years China was one of the fastest growing consumers, but now (thanks to Burma) it has become the fastest growing producer No one would expect that Indonesia may cut its output but it indeed happened! It is expected that 2015 will see a short supply-dominated pattern again despite that the error rate of estimation may be very high

  4. Critical tin statistics in 2014: forecast error Comparison between results and prediction for 2014 The figure compares the output/consumption forecast for February 2014 with existing data The global tin consumption is better than the original expectation The global tin consumption is better than the original expectation The main shock comes from China s output growth The slump of Indonesia s output (including overseas re-refining) is slower than expected Output in other regions is the same as expected The global balance situation was changed from the expectation that the undersupply would exceed 10000 tons to the fact that the oversupply is more than 5000 tons Global balance I n d o n e s i a s output China s output Global demand 000 tons

  5. Global tin consumption growth trend Tin concentrate (kt) Fitting trend curve: The annual growth rate is 1.9% ITRI s tin consumption survey covers the past 11 years Data:ITRI

  6. Above-trend demand growth Tin consumption according to filed of application Ton Consumption of each application field Solder Tinplate Chemicals Brass and bronze Float glass Others Total Change range

  7. LME metal consumption situation s global growth 240 Global consumption index, and the base number in the year of 2000 = 100 220 Aluminium Alumin um Copper 200 Copper 180 Nickel Nickel 160 Lead Lead 140 Zinc Zinc 120 Tin Tin 100 Data source: tin data come from ITRI, and data of other LME metals come from CRU 80 2000 2002 2004 2006 2008 2010 2012 2014

  8. Tin consumption of different industry sectors Consumer electronics Transportation Solder-electronics - Solder-industry Packaging - Tinplate Building Chemicals & Brass and bronze Float glass Industry Others Others 0 20,000 40,000 60,000 80,000 100,000 120,000

  9. Change of proportions of global mines output 350 kt China China 300 Growth in Myanmar (and Africa) Decline in Indonesia and Peru Indonesia Indonesia 250 200 Malaysia Malaysia 150 Bolivia Bolivia 100 Peru Peru 50 Other ROW regions 0 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013

  10. Indonesia s export has been declining 12-month moving total of metals examined before export 110,000 Lowest price in August 2012 105,000 100,000 95,000 90,000 85,000 80,000 Global financial crisis Export suspension-4th quarter of 2011 75,000 New export laws implemented since July 1st, 2013/August 30 and November 2014 70,000 65,000 60,000 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 May-08 May-09 May-10 May-11 May-12 May-13 May-14 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14

  11. Impact of Indonesia s new export laws Total volume examined before export since implementation of new export laws 14,000 Others Solder 12,000 10,000 Tin ingot 8,000 6,000 4,000 2,000 0 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15

  12. Output of South America s mines Tin content in tin concentrate 80 (kt) 70 Bolivia Bolivia 60 50 Brazil Brazil 40 30 Peru Peru 20 10 0 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013

  13. Import volume of concentrate from central Africa Total weight (000 tons) Other countries* Other countries* 25,000 20,000 China China 15,000 Thailand Thailand 10,000 Malaysia Malaysia 5,000 * India, Russia, Germany and Bulgaria 0 2004 2006 2008 2010 2012 2014

  14. Small mining operations are at high cost Cash cost in 2014 after ITRI deducted the cost of by-product (US dollar/ton tin) Small and manual mining operations Mostly in Indonesia Mostly in Indonesia Emerging Burma s supply channel: Lack of data, but rapid expansion may indicate low cost dollar/ton) Cost (US % in the cumulative tin output

  15. The base price fell in 2015, but it will rise in the next years Cash cost after ITRI deducted the cost of by-product (US dollar/ton tin) 2019 ~ 21,000 USD 2014 ~ 17,200 USD dollar/ton) 2015 ~ 15,900 USD Cost (US Falling oil price and strong dollar lower the cost in 2015 % in the cumulative tin output The base price of about 16,000 USD is based on the assumption that the market is caught in an oversupply (market equilibrium price would be higher) Besides, other fixed costs must be considered

  16. The model predicts that the long-term market equilibrium price is about 25,000 USD Full costs of ITRI in 2019 after deduction of by-product costs (USD/ton tin) Long-term market equilibrium price is about 25,500 USD dollar/ton) Cost (US % in the cumulative tin output 100% 300,000 tons

  17. China largely mitigated s raw material supply pressure is China s raw material source kt 180 * Import volume of crude tin for refining purpose Output of recycled refined tin 160 Import of concentrate 140 Unreported mine output 120 Reported mine output * 100 80 60 *Reported output after 2013 (inclusive); the official did not announce mines output after 2013 40 20 0 2005200620072008200920102011201220132014 Data source: ITRI, CRU,CNIA

  18. Significant increase of concentrate import Import volume of China s tin concentrate (material object) Mainly from Burma 35,000 Grade of 60%-70% imported concentrates is 10%; and that of the rest is 20%-35% Myanmar Others 30,000 25,000 20,000 Low price and seasonable factors caused a decline of import value for consecutive five months 15,000 10,000 5,000 0 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Apr-10 Jul-10 Apr-11 Apr-12 Apr-13 Apr-14 Jul-11 Jul-12 Jul-13 Jul-14 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

  19. Significant increase of tin concentrate output China s tin concentrate output ton ton Refined tin output year-on-year growth Data source: ITRI, CNIA

  20. Slowing growth of China s consumption China consumption structure, 2014 s tin concentrate China s tin consumption ton 1% 9% 3% Solder 4% Tinplate Chemicals 11% & Brass and bronze Glass 63% Lead-acid battery 9% Others China s tin consumption year-on-year change

  21. Declining growth of electronic industry Year-on-year growth rate of the output of main electronic products in China % 50 40 Domestic washing machine 30 Household refrigerator 20 Mobile telephone Colour TV set 10 0 Computer-complete machine -10 Microcomputer -20 -30 Apr-12 Jul-13 Apr-14 Mar-13 Jun-12 Jun-14 Mar-15 Sep-13 Jan-Feb-12 Aug-12 Dec-12 Nov-13 Jan-Feb-14 Aug-14 Dec-14 Oct-12 May-13 Oct-14 Data source: State Statistics Bureau

  22. New areas of demand are showing their potential Year-on-year growth of consumption in all areas in the last three years Lead-acid battery In 2014, the new Access Conditions to China Lead-acid Battery Industry started to be implemented, which stipulates that the tin content should be increased from 0.2% to 1.2%. The large scale lead-acid battery market, Brass and bronze relatively low tin price increased the market competitiveness of tin chemical products, the turnabout of economy in Europe and US drove a significant growth of export of tin chemical products used for building purposes. Tin chemistry Tinplate A shifting relationship between growth of LED and auto electronics and the miniaturization of electronic products; Solder

  23. There is still large inventory ton Domestic inventory change 15,000 13,000 11,000 9,000 7,000 5,000 3,000 1,000 -1,000 -3,000 -5,000 -7,000 -9,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

  24. The trend of trade becomes subtle and depends on interest margin between two markets * *export volume predicted based on import of other countries; the recent months data are incomplete export data ton net import net export 3,500 3,000 2,500 2,000 1,500 1,000 500 0 -500 -1,000 -1,500 -2,000 May/10 May/11 May/12 May/13 May/14 Nov/10 Nov/11 Nov/12 Nov/13 Nov/14 Jul/10 Sep/10 Jul/11 Sep/11 Jul/12 Sep/12 Jul/13 Sep/13 Jul/14 Sep/14 Jan/10 Jan/11 Jan/12 Jan/13 Jan/14 Jan/15 Mar/10 Mar/11 Mar/12 Mar/13 Mar/14 Mar/15

  25. Arbitrage space reappears and the import increase is predictable Domestic import price=LME spot price + 3% tariff + 17% VAT Arbitrage space LMB spot price, USD/ton, LME March futures closing price, USD/ton Domestic spot price, USD/ton Shanghai-Tin March futures closing price, USD/ton Domestic import price*

  26. Influence of tin futures listing on SHFE Number of futures contracts traded in March at SHFE Yuan/ton lots Large price fluctuating range Open interest and trade volume expand quickly, comparable to LME daily trading volume The single-day trade volume on May 7 reaches 51604 lots! (1 lot=1 ton)

  27. Influence of tin futures listing at SHFE 1. The domestic market factors increase and the fluidity is speeding up s investment and speculation 2. The domestic price fluctuating range is greater 3. Change of domestic pricing model Bargaining pattern based on spot quotation Futures price+premium/discount 4. Enhanced linkage between domestic and overseas markets 5. Investment demands alleviate the inventory pressure

  28. Market outlook China s supply and demand balance forecast 2011 2012 2013 2014 2015e Ton 160,000 8,134 156,700 -4,800 152,000 -11,835 149,700 14,100 158,100 175,000 4,729 162,700 7,600 178,000 2,000 167,800 8,200 Output 359 Adjusted net export China s refined tin consumption Market equilibrium 156,400 1,300 Data source: ITRI, China Customs, GTIS

  29. 2015 critical forecast matters China and Burma China s tin concentrate output was increased from 175,000 tons in last year to 178,000 tons this year, and the mining quantity in Burma was increased from 30,000 tons to 35,000 tons. The mining quantity was decreased from 86,000 tons to 78,000 tons, of which 73,000 tons were tin concentrate. Indonesia Other supply quantities Output in South America keeps stable (slight increase in Brazil and Bolivia being set off by output decline in Peru). Slight increase in Australia and Africa Global tin concentrate consumption quantity was increased to 367,300 tons, a growth rate of 1.7%. China s growth rate (+3.1%) is greater than other regions of the world (+0.5%) Demand

  30. A predicted short supply (with high error rate) Forecast Table for global refined tin supply/demand balance (000 tons) Global Global refined tin output _ Selling quantity of DLA Global refined tin consumption Global market equilibrium Report stock LME Manufacturer Consumer and others Total Global sales-to-stock ratio (weekly consumption) Recent generally consistent tin price prediction (Reuters survey made in April 2015) 2015=19,070 USD/ton 2016= 21,465 USD/ton

  31. Complex mid-term viewpoint (1) The mining industry and metal price will rebound strongly by 2019, while chemical fertilizer will lag behind* 34 mining industries, metals and fertilizers covered by CRU Zinc, CPC, tin, nickel, coal tar, sulfuric acid, cobalt, Palladium, bauxite, metallurgical coke, metallurgical coal, copper , potassium carbonate Aluminum, lead, platinum, thermal coal, phosphorite Hot Warm ferrochrome, chrome ore, urea, crude oil and Brent crude oil Mild Lead , silicon Cool magnesium Cold Phosphate, DAP, ammonia, silicon-magnesium and gold Froze n Metal, molybdenum, iron ore, sulfur and silver

  32. Complex mid-term viewpoint (2) Figure 4. Schedule for supply quantity of emerging raw material in urgent need on metal market 1-3 years 5 years above 3-5 Next six months years Zinc Iron ore Chrome ore Nickel Metallurgical coal Tin Platinum family metals Copper Uranium Thermal coal Manganese ore Steel Aluminum Bauxite Silver Gold Lead Ferrochrome NB: Exceeding projects already putting into production Data source: Macquarie research, May 2015

  33. Price outlook before 2023 USD/ton 60,000 Central Forecast (2014) Middle predicted value (2014) 50,000 Weak demand scenario (2014) Weakening in demand (2014) 40,000 Supply constraint scenario (2014) Limited supply quantity (2014) 2020 2023 Predicted range: 20,000 -40,000 USD/ton 30,000 Latest most likely path The most possible path recently 20,000 10,000 0 2007 2009 2011 2013 2015 2017 2019 2021 2023

  34. Thanks! Please scan the two- dimension code below to key an eye on International Tin Research Institute No.1003, Jianwei Building, No.66, South Lishi Road, Beijing Tel: + 86 10 6808 6625 E-mail: cuilin@itri.co.uk WeChat ID: ITRIChina

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