The rebuild began in June in reaction to a short squeeze across LME time-spreads but has continued even after the cash premium flipped to a record discount in August.
Combined with elevated stocks registered with the Shanghai Futures Exchange (ShFE), global visible tin inventory of over 15,000 tonnes is more than double the level this time last year.
The visible shift to supply surplus comes when production is significantly disrupted in Myanmar, the world’s third largest producer of the metal.
But tin’s supply problems are more than offset by weak demand.
Around half of the tin produced every year is used as a soldering material on circuit boards, linking usage to the fortunes of the consumer electronics sector.
A shift to home working and home entertainment during Covid-19 caused demand for electronic goods to boom but the sector has since slumped as high inflation in many countries undermines consumer appetite for purchases.
There are signs, however, of demand recovery and, with supply still constrained in Myanmar, the market may need as much stock as it can get.
Shift to surplus
LME stocks of tin were under 2,000 tonnes at the start of June but last week rose above 7,000 for the first time in over three years.
They have fallen back slightly to 6,805 tonnes after two days of net draws but, with just 260 tonnes of cancelled metal awaiting load-out, the uptrend looks likely to run for a while yet.
The initial impetus for the rebuild was the June squeeze on the LME contract. The cash premium over three-month delivery flared out to $1,704 per tonne in June, sucking spare metal into the LME warehouse network.
By the middle of August that premium had switched to a discount of $350 per tonne, the widest contango since at least 1989. The super-contango remains in place, the cash-to-three-months time-spread closing Tuesday valued at $299.
Yet the steady flow of tin into LME warehouses has not stopped with 865 tonnes of fresh warranting activity so far this month.
Boom and bust
Tin’s fortunes are closely tied to the consumer electronics sector, which has experienced a remarkable boom-and-bust cycle over the last three years.
Lockdowns in 2020 and 2021 fed consumer appetite for laptops and home entertainment systems.
Semiconductor sales, a useful proxy for tin usage in circuit-board soldering, surged by over 26% year-on-year in 2021, according to the Semiconductor Industry Association (SIA).
That translated into a boom year for tin demand, usage growing by 7.6%, led by a 12.2% rise in the soldering sector, according to the International Tin Association.
Boom then turned to bust.
The world gradually emerged from lockdown last year and consumer appetite for electronic goods this year has been suppressed by high inflation in many parts of the world.
Semiconductor sales were down by 17.1% year-on-year in the second quarter of 2023, a scale of decline last seen in the global financial crisis of 2008-2009.
Consumers everywhere have been limiting spending and had already loaded up with electronic goods during the previous year of lockdown.
However, global semiconductor sales have registered small month-on-month increases since April and the year-on-year gap narrowed to 11.8% in July, according to the SIA.
The World Semiconductor Trade Statistics agency forecasts global revenues to fall by 10.3% over the year as a whole but it is expecting a robust 11.8% recovery next year.
Much, of course, depends on inflation over the rest of 2023.
Supply crunch, demand slump
Rising stocks of tin on both London and Shanghai markets have blown away a lot of speculative froth from the market.
Money managers have trimmed their net long position in London from 1,508 contracts in June to just 366, while market open interest in Shanghai has collapsed from a record high of 137,828 contracts in March to a current 59,881.
The visible evidence of weak demand has counterbalanced concerns about supply from Myanmar after the semi-autonomous Wa State suspended all tin mining and processing activity at the start of August for a wide-ranging audit.
The LME three-month tin price has been tracking sideways, last trading at $26,000 per tonne, even as spreads gyrated wildly.
However, it remains to be seen how long the relative calm will last.
The suspension of raw materials supply from Myanmar to China has already led to several Chinese smelters taking downtime for maintenance work.
Shanghai stocks have started to draw, headline exchange inventory sliding from 9,608 tonnes at the start of August to 7,735 as of last Friday.
The inventory drain is likely to continue for as long as it takes the Wa authorities to complete their audit work, a time-line only they know.
With the slump in tin’s major end-use sector also at an end, the market may want to enjoy ample availability while it can.