TIN Market Outlook

USA Stockpiling 1947 – 1960 After the Second World War and at the start of the Cold War, the USA identified a vulnerability of both their and the Soviet Union’s economies in that each imported 100% of their tin consumption. Tin was vital in a number of military and civil applications – this was the start of the electronics age and tin was needed to make solder for circuit boards. Between 1947 and 1960 the US Defence Logistics Agency (“USDLA”) bought 350,000 tons of tin on the World markets – in a period of only 13 years the USDLA purchased 3 years of total global production! Tin supplies were squeezed, prices rallied hugely and the Russians embarked on a major exploration programme. The large alluvial deposits at Pyrkyky in Siberia was discovered and quickly put into production. This was sufficient to see Russia self-sufficient in tin by the mid 1950’s. This new Russian production and the ending of American stockpiling caused a major drop in tin prices. In 1960 the USDLA embarked on an inventory liquidation programme which would take 45 years. USDLA stockpile sales averaged 3% of World supply between 1960 and 2005. International Tin Council In 1956 six producing countries and nine consuming countries established The International Tin Council (“ITC”). The ITC’s mandate was to keep prices stable and above a certain floor price by maintaining a buffer stock of 25,000mt. Ultimately 6 international agreements were signed by 22 countries but crucially this did not bind either Bolivia or Brazil to production quotas in the sixth and final agreement. Quota busting by member countries and ever increasing exports from non-member countries occurred simultaneously with a reduction in demand due to the recession of the early 1980s. Unable to maintain the floor price, heavily indebted and leveraged, in October 1985 the ITC collapsed with control of 52,000mt of physical tin, derivatives positions for another 90,000mt and debts of £897m. 121,000mt of tin had to be sold as part of the liquidation of the ITC’s assets – equivalent to 8 months of Global supply. Prices collapsed. In real terms the tin price fell 88% between 1980 and 2002. 1985 Onwards The tin market was kept amply supplied throughout the 1990’s and early 2000’s due to a massive ramp up in supply from Indonesia, China and Peru, keeping prices depressed and the market in a surplus. This 20 year bear market discouraged tin exploration – as a consequence today there is a severe shortage of projects. The ending of the USDLA disposal programme in 2005 marked the end of the decline and prices have rallied sharply since from $5,000 to $18,000 today. Even at this price only an estimated 80% of World production is profitable. This can be considered a long term floor price.

Tin Supply Outlook

According to ITRI World mine production peaked at 319kt in 2005, falling to 272kt in 2012 as Indonesian and Peruvian production passed peak. This trend of lower mine supply was reversed in 2013 and 2014 when a new source of supply, Myanmar, hit the market unexpectedly. Production in Myanmar is estimated to have risen from 1,400mt in 2010 to 30kt in 2014. The price of tin will be heavily influenced by future production levels in Myanmar. The following quote comes from a presentation given by the main consumer of Myanmar concentrate production, Yunnan Tin Company: “Since 2013, significant amount of supply from Myanmar has temporarily relieved the shortfall of tin concentrates. However remaining tin resource and tin grade in Myanmar are sharply declining. We estimate that the tin output has already peaked in 2014 with a downward trend in following years” Zhang Fu – General Manager, Yunnan Tin Co, ITRI Tin conference 18-20 April 2015. ITRI are forecasting a return to deficit for 2015, and a substantial 3.2% deficit in 2016