Business

Tuesday June 16, 2009

Tin industry braces for further drop in demand

Commodities Talk - A weekly column by HANIM ADNAN


Downtrend could stall efforts to push opening of new mines in Malaysia

FROM one crisis to another in past decades, tin is now being challenged again with a possible erosion in demand, which is suppressed by the current global recession.

Last week, ITRI Ltd, an international tin grouping, came up with a disturbing report stating that demand would likely drop 10% to 15% this year on the back of excess supply based on its survey on tin consumers.

In 2007, world tin usage peaked at over 360,000 tonnes, having grown at some 4% a year over the previous decade. Growth rates in fact were slowing even before the onset of recession and demand dropped very sharply in the final quarter of 2008.

Tin surplus as at end-April was at 8,500 tonnes, the highest since 2005 while the price of the commodity has dropped about 26% so far this year.

However, industry observers still cannot figure out whether the drop in tin demand is entirely due to reduced usage, consumers running down their tin stocks or reduced stocks of semi-finished tin products.

Apparently, there is still a lot of uncertainty on consumer stock levels over the past quarters.

In Malaysia, a potential drop in tin demand could stall the Malaysian Chamber of Mines’ initiative to push for further exploration and opening of new tin-rich mines particularly in the Kinta Valley area.

The country’s tin reserve is estimated at RM30bil.

Today, there are 13 active tin mines in Malaysia with annual production about 3,000 tonnes tin-in-concentrate compared with nearly 1,000 mines producing about 70,000 tonnes in the 1970s!

Even though Malaysia is no longer a major tin exporter, Malaysia Smelting Corp Bhd, the country’s sole tin company, is ranked the world’s third-largest tin refiner based on its operations in Malaysia and Indonesia.

Outside Indonesia and China – the two world’s largest producers – ITRI has identified mine projects with combined annual capacity of some 38,000 tonnes a year and possible projects with a capacity of around 35,000 tonnes a year.

Virtually, no new projects will come on stream over the next three years and most of the ones identified are not economically viable at current tin prices trading about US$15,700 per tonne.

Having said that, a return to a longer term trend growth in demand and production will largely depend on China and other emerging Asian markets, which are expected to increase their uptakes.

Most of the refined tin is used in the production of solder (particularly, lead-free solder), an essential component in the manufacture of electrical and electronic (E&E) products. The other major consumers of refined tin are manufacturers of tin plate and pewter.

However, despite carrying the stigma of a sunset industry, the tin industry in Malaysia is still surviving on increasing solder demand from the local E&E industries.

● Hanim Adnan is assistant news editor at The Star. She believes that tin, similar to other world metal commodities, is always at the mercy of major buyers.


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