Tin prices may triple on hedge funds interest

Print this page Posted on : 07-25-2007 by recycleinme.com

London Metal Exchange tin prices have the potential to triple this year as hedge funds turn their sights to what had traditionally been a sleepy metal, but analysts said any such gains wouldn’t be fundamentally justified.

INDONESIA CRACKDOWN

Analysts forecast LME tin price gains will be capped around $16,000 a tonne amid rising LME stocks and the resumption of tin production in the world’s largest producer Indonesia following a Government –led crack down last October.

However, they don’t rule out the ability of funds to push prices even higher, with several hedge funds active in tin said to be tipping a significant market hike.

The move into tin by the funds has already been reflected in prices. Tin has gained 11 per cent over the past week and 59 per cent since January, hitting $15,700/tonne Monday to match the market’s all-time high seen last Thursday.

SPECULATIVE BUYING

Looking ahead, tin price moves will depend largely on what funds decide to do, said Triland’s Mr. Michael Khosrowpour.

Traders said recent gains have been fuelled by technical and speculative buying, rather than fresh fundamental news. Although analysts argue the market’s fundamentals don’t support any further significant gains, some hedge funds have indicated tin prices could exceed those of nickel, which rose to near $52,000/tonne in May.

ARTIFICIAL GAINS

As nickel prices drop, speculative buyers might be looking for another metal to push up so tin “may be the next one to go,” said Triland’s Mr. Khosrowpour.

The gains in tin were due to bullish market fundamentals. Lower production in Indonesia was key to the market’s upwards move, with authorities there cracking down on dozens of small smelters last October, forcing them to close due to environmental and tax code breaches. LME tin prices hit new highs at the time on the subsequent production cuts.

INDONESIAN PRODUCTION

But since then, Indonesian production has come back on line slowly and the metal is starting to come out of Indonesia, Bhar said.

Nonetheless, the reopening of small smelters in Indonesia has been a slower process than people expected. ITRI analyst Mr. Peter Kettle said despite the return to production, Indonesian tin output is forecast at 90,000 tonnes in 2007 compared to 125,000 tonnes last year.

“My understanding is at the moment only a handful (of smelters) are producing”, Mr. Kettle said.

CHINA OUTPUT DOWN

Additionally, China’s recent tin production figures showed a slight fall in June. Output of other LME metals increased sharply, but tin in failing to keep pace with the boom due to a shortage of concentrate, the raw ingredient used to make tin metal, Mr. Kettle said.

Source : Business Line