A Changing Global Tin Market

May 29, 2015

Cui Lin

Chief Representative of International Tin Research Institute in China

-40% -30% -20% -10% 0% 10%

Tin

Nickel

Copper

Lead

Aluminium

Zinc

Price comparison between tin and other LME metals

LME and tin price index (2000 =100)

Tin

LME

Comparison of price between April 2015 and April 2014

Zinc

Aluminum

Lead

Copper

Nickel

Tin

Inde

x

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

Critical tin statistics in 2014: forecast error

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

000 tons

Global balance

Indonesia’s output

China’s output

Global demand

Comparison between results and prediction for 2014

Global tin consumption growth trend

Data:ITRI

Tin concentrate (kt)

Fitting trend curve:

The annual growth rate is

1.9% ITRI’s tin consumption survey covers the past 11

years

Above-trend demand growth

Tin consumption according to filed of application

TonConsumption of each application field

Solder Tinplate Chemicals Brass and bronze Float glassOthers

Total

Change range ％

80

100

120

140

160

180

200

220

240

2000 2002 2004 2006 2008 2010 2012 2014

Aluminium

Copper

Nickel

Lead

Zinc

Tin

LME metal consumption’s global growth situation

Global consumption index, and the base number in the year of 2000 = 100

Data source: tin data come from ITRI, and data of other LME metals come from CRU

AluminumCopper

Nickel

Lead

Zinc

Tin

Tin consumption of different industry sectors

0 20,000 40,000 60,000 80,000 100,000 120,000

其他

工业

建筑

包装

交通

消费电子

焊料 -电子

焊料 -工业

马口铁

化工

黄铜 & 青铜

浮法玻璃

其他

Consumer electronics Transportation

Packaging

Building

Industry

Others

Solder-electronics

Solder-industry

Tinplate

Chemicals

Brass and bronze Float glass

Others

0

50

100

150

200

250

300

350

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013

China

Indonesia

Malaysia

Bolivia

Peru

ROW

印尼和秘鲁下滑，缅甸（及非洲？）增长

Change of proportions of global mines’ output

kt

China

Indonesia

Malaysia

Bolivia

Peru

Other regions

Decline in Indonesia and Peru Growth in Myanmar (and Africa)

60,000

65,000

70,000

75,000

80,000

85,000

90,000

95,000

100,000

105,000

110,000

Jan-

08

May

-08

Sep

-08

Jan-

09

May

-09

Sep

-09

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Sep

-11

Jan-

12

May

-12

Sep

-12

Jan-

13

May

-13

Sep

-13

Jan-

14

May

-14

Sep

-14

Jan-

15

Indonesia’s export has been declining

12-month moving total of metals examined before export

Export suspension-4th quarter of 2011

Lowest price in August 2012

New export laws implemented since July 1st,

2013/August 30 and November 2014

Global financial

crisis

Impact of Indonesia’s new export laws

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15

其他

焊料

锡锭

Total volume examined before export since implementation of new export laws

Others Solder

Tin ingot

0

10

20

30

40

50

60

70

80

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013

Bolivia

Brazil

Peru

Output of South America’s mines

Tin content in tin concentrate (kt)

Bolivia

Brazil

Peru

Import volume of concentrate from central Africa

0

5,000

10,000

15,000

20,000

25,000

2004 2006 2008 2010 2012 2014

Othercountries*

China

Thailand

Malaysia

总重（千吨）

泰国

马来西亚

* India, Russia, Germany and

Bulgaria

Other countries*

China

Thailand

Malaysia

Total weight (000 tons)

Small and manual mining operations

Emerging Burma’s supply channel:

Lack of data, but rapid expansion may indicate low

cost

–Mostly in Indonesia–Mostly in Indonesia

Cos

t (U

S

dol

lar/

ton

)

Cash cost in 2014 after ITRI deducted the cost of by-product (US dollar/ton tin)

% in the cumulative tin output

Small mining operations are at high cost

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

2015 ~ 15,900 USD

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)

Cos

t (U

S

dol

lar/

ton

)

% in the cumulative tin output

Besides, other fixed costs must be considered

Falling oil price and strong dollar lower the cost in 2015

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

100%≈300,000 tons

Cos

t (U

S

dol

lar/

ton

)

% in the cumulative tin output

China’s raw material supply pressure is largely mitigated

kt

Data source: ITRI, CRU,CNIA

*Reported output after 2013 (inclusive); the official did not announce mines’ output after 2013

China’s raw material source

0

20

40

60

80

100

120

140

160

180

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

用于再精炼的粗锡进口量再生精锡产量精矿进口量未报告的矿山产量报告的矿山产量*

Import volume of crude tin for refining purpose Output of recycled refined tin

Import of concentrate

Unreported mine output

Reported mine output *

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Jan-

10

Apr

-10

Jul-1

0

Oct

-10

Jan-

11

Apr

-11

Jul-1

1

Oct

-11

Jan-

12

Apr

-12

Jul-1

2

Oct

-12

Jan-

13

Apr

-13

Jul-1

3

Oct

-13

Jan-

14

Apr

-14

Jul-1

4

Oct

-14

Jan-

15

中国锡精矿进口量（实物量）

缅甸 其他

Significant increase of concentrate import

• Mainly from Burma

• Grade of 60%-70% imported concentrates is 10%; and that of the rest is 20%-35%

• Low price and seasonable factors caused a decline of import value for consecutive five months

Import volume of China’s tin concentrate (material object)

Myanmar Others

Significant increase of tin concentrate output

ton

Data source: ITRI, CNIA

China’s tin concentrate output

ton

Refined tin output year-on-year growth

Slowing growth of China’s consumption

ton

63%9%

11%

4%

3%

9%

1%

焊料

马口铁

化工

黄铜 & 青铜

玻璃

铅酸蓄电池

其他

China’s tin concentrate consumption structure, 2014

China’s tin consumption

China’s tin consumption year-on-year change

Solder

Tinplate

Chemicals

Brass and bronze Glass

Lead-acid battery Others

Declining growth of electronic industry

Data source: State Statistics Bureau

-30

-20

-10

0

10

20

30

40

50

Jan

-Feb

-12

Ap

r-12

Jun

-12

Au

g-1

2

Oct-

12

De

c-1

2

Ma

r-1

3

Ma

y-1

3

Jul-

13

Se

p-1

3

No

v-1

3

Jan

-Feb

-14

Ap

r-14

Jun

-14

Au

g-1

4

Oct-

14

De

c-1

4

Ma

r-1

5

家用洗衣机

家用电冰箱

移动通信手持机电子计算机整机微型计算机设备彩色电视机

%Year-on-year growth rate of the output of main electronic products in China

Domestic washing machine

Household refrigerator

Mobile telephone

Computer-complete machine

Microcomputer

Colour TV set

New areas of demand are showing their potential

Year-on-year growth of consumption in all areas in the last

three years • 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,

• 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.

• A shifting relationship between growth of LED and auto electronics and the miniaturization of electronic products;

Lead-acid battery

Brass and bronze

Tin chemistry Tinplate

Solder

There is still large inventory

ton

-9,000

-7,000

-5,000

-3,000

-1,000

1,000

3,000

5,000

7,000

9,000

11,000

13,000

15,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

国内库存的变化 Domestic inventory change

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

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jan

/10

Ma

r/1

0

Ma

y/1

0

Jul/1

0

Sep

/10

No

v/1

0

Jan

/11

Ma

r/1

1

Ma

y/1

1

Jul/1

1

Sep

/11

No

v/1

1

Jan

/12

Ma

r/1

2

Ma

y/1

2

Jul/1

2

Sep

/12

No

v/1

2

Jan

/13

Ma

r/1

3

Ma

y/1

3

Jul/1

3

Sep

/13

No

v/1

3

Jan

/14

Ma

r/1

4

Ma

y/1

4

Jul/1

4

Sep

/14

No

v/1

4

Jan

/15

Ma

r/1

5

Ӕ Ս Ӕӟ Ս

net import net export

Arbitrage space reappears and the import increase is predictable

Arbitrage space

Domestic import price=LME spot price + 3% tariff + 17% VAT

LMB spot price, USD/ton, Domestic spot price, USD/ton Shanghai-Tin March futures closing price, USD/tonLME March futures closing price, USD/ton Domestic import price*

Influence of tin futures listing on SHFE

Number of futures contracts traded in March at SHFE • 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)

Yuan/ton lots

Influence of tin futures listing at SHFE

1. The domestic market’s investment and speculation factors increase and the fluidity is speeding up

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

Market outlook

Data source: ITRI, China Customs, GTIS

China’s supply and demand balance forecast

2011 2012 2013 2014 2015e

吨产量 160,000 152,000 158,100 175,000 178,000

调整后的净出口 8,134 -11,835 359 4,729 2,000

中国精锡消费量 156,700 149,700 156,400 162,700 167,800

市场平衡 -4,800 14,100 1,300 7,600 8,200

Ton

Output

Adjusted net export

China’s refined tin consumption Market equilibrium

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.

Indonesia The mining quantity was decreased from 86,000 tons to 78,000 tons, of which 73,000 tons were tin concentrate.

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

Demand 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%)

A predicted short supply (with high error rate)

Recent “generally consistent” tin price prediction (Reuters survey made in April 2015)

2015=19,070 USD/ton 2016= 21,465 USD/ton

Table for global refined tin supply/demand balance

(000 tons)

Forecast

GlobalGlobal refined tin output _Selling quantity of DLA Global refined tin consumption Global market equilibrium

Report stockLMEManufacturer Consumer and others

Total Global sales-to-stock ratio (weekly consumption)

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

ferrochrome, chrome ore, urea, crude oil and Brent crude oil

Lead , silicon

magnesium

Phosphate, DAP, ammonia, silicon-magnesium and gold

Metal, molybdenum, iron ore, sulfur and silver

Hot

Warm

Mild

Cool

Cold

Frozen

Complex mid-term viewpoint (2)

Figure 4. Schedule for supply quantity of emerging raw material in urgent need on metal market

Next six months

1-3 years

5 years above

3-5 years

Chrome ore

Nickel

Bauxite

Zinc

Platinum family metals Copper

Metallurgical coal

Silver

Gold

Lead

Ferrochrome

Iron ore

Uranium

Thermal coal

Manganese ore

Steel

Aluminum

Tin

NB: Exceeding projects already putting into production

Data source: Macquarie research, May 2015

0

10,000

20,000

30,000

40,000

50,000

60,000

2007 2009 2011 2013 2015 2017 2019 2021 2023

Central Forecast (2014)

Weak demand scenario (2014)

Supply constraint scenario (2014)

Latest most likely path

Price outlook before 2023

USD/ton

2020–2023 Predicted range: 20,000 -40,000 USD/ton

Middle predicted value (2014)

Weakening in demand (2014)

Limited supply quantity (2014)

The most possible path recently

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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