This week, the 1 # tin ingot market in East China experienced a significant decline, with an average market price of 409890 yuan/ton on October 1st and 393490 yuan/ton as of October 9th, a decrease of 4.00%.
On October 8th, the first trading day after the holiday, the spot price surged to 415240 yuan/ton, with a daily increase of 1.31%; On October 9th, the market experienced a significant drop, with prices falling back to 393490 yuan/ton, a single day drop of up to 4.00%. In the past two days, there has been a sharp reversal of the market trend, with a single day drop significantly greater than the pre holiday increase.
Macro analysis
The core driving force behind this round of sharp decline is the concentrated correction of macro expectations. Firstly, the revenue realization signal of overseas AI computing power leaders did not meet the extremely optimistic expectations of the market, leading to a comprehensive weakening of technology stocks and semiconductor sectors, and a cooling and reassessment of the demand narrative for tin as a “computing metal” in the market. Secondly, the minutes of the Federal Reserve’s September meeting released a hawkish signal, indicating that there is still a possibility of interest rate hikes within the year. The US dollar index climbed to a nearly one-and-a-half-year high, forming a systematic valuation suppression on metals denominated in US dollars. Thirdly, the geopolitical risks in the Middle East continue to ferment, international oil prices rise, energy inflation stickiness and concerns about global industrial activity slowdown are heating up simultaneously, and the risk aversion of funds has significantly increased, further suppressing risky assets.
The following is a fundamental analysis:
The rigid constraints on the supply side and mining side are still present. The progress of resuming production in the Wa State of Myanmar is lower than expected, and the current level of resuming production in the Manxiang tin mine is about 40% -50% of before the mining ban, with full recovery or postponement until 2027; Although Indonesia’s export quota has been raised, the actual increase is limited. The processing fee for domestic tin concentrate remains at a historical low (about 18000 yuan/ton for 40% tin concentrate in Yunnan), and smelting profits are suppressed, making it difficult to significantly release refined tin production.
Inventory side – significant differentiation between internal and external factors. LME tin inventory has dropped to a historical low of 4405 tons, while domestic social inventory was about 9194 tons before the holiday, showing a pattern of “tight overseas and sufficient domestic”, and the overall supply and demand are in a weak balance state.
Demand side – structural differentiation intensifies. The expansion of semiconductor packaging and HBM storage production still drives up the amount of solder used, but the domestic semiconductor sector continues to weaken after the holiday, coupled with the negative contribution of photovoltaic modules to tin consumption of about 4882 tons per year. The performance of traditional consumer sectors in the peak season is not as expected, and downstream acceptance of high prices has significantly decreased, resulting in insufficient willingness to receive high-level goods.
comprehensive analysis
Overall, tin prices are facing a game between “macro suppression and strengthening” and “low inventory at the mining end to support the bottom” in the short term. At the macro level, doubts about AI investment returns and the high level of the US dollar pose upward pressure; At the fundamental level, rigid constraints at the mining end and low LME inventory provide bottom support, but high domestic inventory and lower than expected demand realization weaken upward elasticity. The expected operating range for the short-term Shanghai tin main contract is 380000-405000 yuan/ton, with core focus variables including the pace of macro sentiment recovery, the actual progress of Myanmar’s resumption of production, and the degree of fulfillment of domestic demand during the “Silver Ten” peak season.
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