Core ideas
Tin ore increase ahead of the sharp cash (80% of the whole year, an increase of 3.8% for the whole year)
Incremental sources: First, Myanmar tin mines due to its government dumping, the contribution is higher, the year-on-year increase is obvious; Second, low cardinality leads to projects with considerable increments such as MetalX (Remingsen); Third, other projects have basically increased production slightly as expected.
Consumption growth is under heavy expectations, and the annual consumption growth rate (-1.3%) cannot meet the expectations at the beginning of the year (3%)
Overseas tin consumption fell sharply by about 4.5% in the first half of the year, and remained stable in the second half of the year. In the first half of the year, due to the epidemic in China, consumption increased by only 0.6%, and in the second half of the year, it will be weakly improved month-on-month, with a growth rate of about 2.3% for the whole year. The growth rate of global tin consumption fell by -1.3% year-on-year throughout the year, and in the second half of the year, it increased by about 1% year-on-year
The tin element is in full surplus, which is concentrated at the mine end
Domestic and foreign tin ingot output has been disrupted, with a surplus of about 9k tons or 2.5% of tin ore. Domestic refineries announced overhauls in a large area, delaying the pace of mine-ingot conversion. The main foreign producing countries and enterprises are also facing the problems of export certificates, suspension of production and maintenance, the growth rate of tin ingot output is not as fast as tin ore, and the domestic has become the main accumulation of tin ore inventory due to high imports.
The excess of tin ore has brought considerable smelting profits, and the existing smelting profits drive the tin market in the second half of the year is still facing a surplus of about 1%.
Rebalancing of the tin market – low prices are needed to curb supply
How will prices inhibit supply and match demand? The ultimate is to cut tin ingot output, which is done by compressing smelting profits. If you want to compress smelting profits, you must reverse the current situation of a large surplus of tin ore. It is further necessary for tin prices to fall by a certain margin to allow high-cost production capacity to withdraw from the supply system.
And what kind of price is required? The degree of price decline is related to the excess amount, the larger the excess amount corresponding to the lower the suppression price, in the next 1 year or so, tin ingots are still close to 1% excess, from the tin ore cost curve, the price needs to be as low as 21000-22000 US dollars / ton nearby.
Price outlook: Based on the above analysis, the price suppression of supply cannot be achieved overnight, which means that the tin price volatility range will be re-upgraded in the second half of 2022, and the LME core is expected to run at (21000, 29000) US dollars / ton; The core operation of the domestic main contract is (160000, 230000) yuan / ton.
Risk points: domestic and foreign supply interference, consumption recovered more than expected, etc.
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First, the market review
In the first half of this year, tin prices rose after a stalemate, and finally fell back rapidly. In the first quarter of this year, while the demand side is still optimistic, Indonesia's supply has suffered a significant loss, inventories still maintain a very low position, and tin prices continue the strong performance in 2021. Subsequently, the domestic epidemic superimposed on the overseas Russian-Ukrainian conflict and high inflation, the terminal industry has shown signs of deterioration, but the downstream industry still maintains strong confidence in this year's consumption, and a large number of low prices are replenished to provide strong support for tin prices in March and April. But in the end, the impact of macro events exceeded expectations, the hope of a strong recovery in consumption was dashed, a large amount of excess became a foregone conclusion, and tin prices also fell by about 40%.
Second, the increase in tin ore is greatly cashed in ahead of schedule
According to the financial reports of listed companies, the National Bureau of Statistics and customs and other data, major mining enterprises have basically achieved increased production, and only Timah has a slight reduction, but the impact is not large. And the Q1 tin ore increase has already fulfilled most of the expected increase for the whole year. From the perspective of incremental sources: First, Myanmar tin mines due to its government dumping, the contribution is relatively high, the year-on-year increase is obvious; Second, the low base led to a considerable increase in the project, such as MetalX (Remingsen), the same period last year was affected by the physical production and low ore grade, the total year-on-year total of 991 tons or 66.7%. Third, other projects have basically increased production slightly as expected.
2.1 Alphamin (DRC): Production is generally stable
Alphamin's financial report shows that tin ore metal tons production in 2022Q1 was 3061 tons, an increase of 450 tons or 17.2% year-on-year (a lower base in the same period last year). Since Q2 2021, the company's physical tonnage production has remained basically stable, and although there is a problem of grade reduction in Q2 in 2021, Q3 will be solved as scheduled. The company's Psyneum production guidelines (tonnes of metal) in Q2 this year were about 3,000 tonnes, which was basically flat month-on-month. This year's Q1 tin ore grade remained at an average level after restoration, so we expect the company's future tin production to remain stable at around 12,500 tonnes per annum.
2.2 Minsur (Peru and Brazil): Peru contributed major increments
Minsur consolidated data shows that the 2022Q1 tin ore metal tonage production was 8524 tons, an increase of 360 tons or 4.4% year-on-year. At present, the production of mines in Peru, the main production area, is basically stable and increasing, and we expect the company's annual output in 2022 to be about 33,300 tons. By country, the increase is mainly due to Peru, while Brazil has a reduction but has little impact due to its small proportion. In Peru, there were increases in both the San Rafael and B2 mines, mainly due to their improved grades. In the first quarter of this year, tin ore metal tons production totaled 6818 tons, an increase of 383 tons or 6% year-on-year. The company's physical output from tin mines in Peru decreased by 23,700 tonnes or 8% compared to the same period last year, but improved to around 2.18% (about 2% in the same period last year). In Brazil, tin ore production in the first quarter of this year was 1706 tons of metal, down 23 tons or 1.3% year-on-year. Brazil's physical tin ore output decreased by about 4.9%, but also due to a slight increase in grade, tin ore metal output was basically the same as the same period last year.
2.3 MetalX (Australia): Significant growth on a low base in the same period last year
MetalX's tin ore metal tonne production in the first quarter of this year was 2477 tonnes, an increase of 991 tonnes or 66.7% compared to the same period last year. In the first quarter of last year, the company caused short-term production interruption due to mechanical and electrical failures, and the mining grade was low, and the year-on-year growth rate was more obvious under the effect of low base. The company's quarterly report said that there are small-scale overhauls but the output has not been affected, there are still maintenance plans in April, considering that there are still higher profits under the current tin price level, the impact of maintenance may be limited, and we expect the company's annual output to be about 10,000 tons.
2.4 Timah (Indonesia): The only mining company to reduce the amount, but it has little impact on the total output of tin ore
Indonesia's Timah's mineral metals in the first quarter of this year decreased by 517 tons or 10.3% compared to the same period last year. Structurally, the company's mineral reduction is mainly due to land mines, Q1 production of 1583 tons fell by about 18.8% year-on-year, while marine mines fell by only 4.9% year-on-year. Due to the depletion of Indonesian land mines, the company may gradually shift the focus of mining to sea mines, but due to its difficulty in mining, its production release may be restricted.
2.5 Myanmar: The government has thrown large reserves, and the increase in mainland tin ore imports is obvious
According to customs data, the mainland imported about 73,200 tons of Physical Tin Ore from Myanmar in the first quarter of this year, an increase of more than 100% year-on-year, and it is estimated that the increase in tin content from Myanmar is about 8,000-10,000 tons. It is expected that the Myanmar government has thrown a large number of reserves, and the downward trend of tin ore imports from Myanmar has also shown a certain turn, and the government has thrown high-grade old ore to drive the recent increase in grades. Affected by the epidemic in April, imports of tin ore from Myanmar have a certain loss, and the port stagnation part or reflected in the follow-up customs data is expected to decline in the year-on-year growth rate in the second quarter, but there is still a high growth rate. From a long-term perspective, Myanmar's tin ore grade is likely to decline, and the government's storage sustainability is in doubt, and Myanmar mine supply may still be limited.
2.6 Bolivia: The doubling target is difficult to achieve and is expected to be on par with last year
Production data show that bolivia's tin ore metal production in the first quarter of this year was about 4500 tons, and under the effect of low base in the same period last year, it increased by 325 tons or 7.8% year-on-year. Bolivia's annual tin ore production (metal tons) in 2021 is 19,660 tons, basically completing the production target of 20,000 tons, but in the context of no large-scale project production, the previous 40,000 tons production target of 40,000 tons in 2022 indicated by the president of its official mining company is highly likely to be unattainable, combined with the current published data, we still maintain this year's 20,000 tons of production expectations, and the future will be adjusted according to the actual production situation.
Third, the performance of consumption has negative expectations
This year's consumption growth rate is under heavy expectations. The repeated domestic epidemics in the first half of the year had a greater impact on the macroeconomic operation of the mainland, and the decline in confidence also inhibited the consumption tendency of residents to a certain extent; Overseas countries are also facing the challenges of the Russian-Ukrainian conflict and high inflation, the pressure on the expenditure of necessities is prominent, and the support of the replenishment cycle is gradually weakening. Under the macro suppression, the main terminals or difficult to put the volume, this year's tin consumption growth rate may not be able to maintain positive growth, we expect the annual consumption to be slightly reduced, the amplitude of about 0.4%.
3.1 The macro economy is not good, dragging down spending power
There is downward pressure on the macro economy, which inhibits consumer confidence. Affected by the epidemic in China, economic data is generally poor, and due to the increase in preventive demand, residents' tendency to save has risen, and it will take time for the effect of cross-cycle stimulus policies to appear.
3.2 Europe and the United States gradually lost the support of replenishment
Inflation in Europe and the United States is high, and the economy is gradually losing the support of the replenishment cycle. Inflation in the post-epidemic era in Europe and the United States is high and sustainable, and the pressure on residents' expenditure on necessities is relatively large, which may reduce the consumption of non-essential goods accordingly. In addition, the PMI data has recently deteriorated, the inventory level has reached a high level, and the economic growth may gradually lose the support of the replenishment cycle.
3.3 The performance of the terminal industry is differentiated
Tin consumption is mainly concentrated in the field of solder (about 60%), including household appliances, electronic products, automobiles and photovoltaic manufacturing industries. In the past two years, there have been structural changes in the consumer sector, and the new and old sectors have been seriously differentiated. Tin consumption in traditional areas is facing insufficient growth rate decline or even negative growth, while in new areas such as new energy vehicles and photovoltaics, there is a higher growth rate, but its proportion is relatively limited.
This year's tin consumption growth rate (-1.3%) is basically unable to meet the expectations of the beginning of the year (3%). Overseas tin consumption fell sharply by about 4.5% in the first half of the year, and even if it is repaired in the second half of the year, the annual growth rate is still a big drag, and we estimate that it will be reduced by about 3.8%. In the first half of the year, due to the epidemic in China, consumption increased by only 0.6%, and in the second half of the year, it will be weakly improved month-on-month, with a growth rate of about 2.3% for the whole year. The growth rate of global tin consumption fell by -1.3% year-on-year for the whole year, and in the second half of the year, it increased by about 1% year-on-year.
3.3.1 The traditional consumption sector is sluggish
Electronic products sales data is slightly better than the output, channels or in the active library cycle, upstream production is difficult to release, domestic mobile phone computers and other electronic products cumulative output has declined to varying degrees, and the amplitude has an expansion trend, is expected to drag down tin consumption of about 0.5% throughout the year. The home appliance industry is facing the same problem, and is also affected by the decline in real estate, although there are policies to encourage the conditions to carry out home appliances to the countryside, but the overall boost effect may still be limited, the cumulative output of household appliances such as air conditioners, washing machines and refrigerators fell by 2%, 4% and 8% respectively. The second half of the home appliance industry has entered the off-season, the output or further deterioration, combined with the proportion of tin consumption We estimate that the tin consumption of the home appliance industry this year will drop by about 0.7% year-on-year.
3.3.2 The proportion of new consumption areas is low and the boost is small
New consumption remains booming. Affected by the epidemic, april automobile production significantly discounted, it is expected that the total amount of the automotive industry throughout the year is difficult to produce a positive contribution, tin consumption increase probability by structural change, that is, the new energy vehicle tin consumption pull, new energy vehicles single vehicle tin consumption significantly higher than the traditional fuel vehicle, so in the overall industry growth is not good, the increase in new energy vehicles is still enough to make a positive contribution to tin consumption, we expect the automotive industry to contribute about 0.6% tin consumption growth year-on-year. In addition, the continuous high prosperity of photovoltaics has brought bright spots to tin consumption, and the cumulative installed capacity of photovoltaics in January-May has reached 23.7GW, far exceeding the level of the same period last year. Combined with the proportion of photovoltaic consumption, we expect the photovoltaic industry to contribute about 2% of the growth rate of tin consumption.
Fourth, the tin element is in excess, which is concentrated at the mine end
Domestic and foreign tin ingot output has been disrupted, with a surplus of about 9k tons or 2.5% of tin ore. Domestic refineries have announced large-scale overhauls due to poor tin consumption, delaying the pace of mine-ingot conversion. Foreign major producing countries and enterprises are also facing the problems of export certificates, suspension of production and maintenance, and the growth rate of tin ingot output is not as fast as that of tin ore. Due to the high import volume in China, it has become the main accumulation of tin ore inventory, and it is expected that the subsequent release of tin ingot production will gradually go to the warehouse. The excess of tin ore has brought considerable smelting profits, and the existing smelting profits drive the tin market in the second half of the year is still facing a surplus of about 1%.
4.1 Smelting end disturbance is frequent
After the increase in tin ore in Q1 this year, the output growth rate of major tin ingot producing countries and enterprises has not been matched: First, after the high increase in domestic tin ore imports, the output of tin ingots has only increased by about 1300 tons year-on-year. Second, overseas, malaysia Q1 epidemic repeatedly, tin ingot output has a certain loss, the rest of the production countries and enterprises are also affected by export certificates and maintenance.
4.1.1 Indonesia: Export certificate issues
In January this year, Indonesia's tin ingot exports were severely damaged by the impact of the license, and Q1 increased by only about 1.2% year-on-year. Judging from its import data, the import volume of tin ore is still relatively small, and the raw materials for the production of tin ingots in Indonesia are mainly local tin ore. Proportionally, the current proportion of other refineries except Tianma has increased, and the export of tin ingots in April can be quickly repaired, which may be that tin ore production is relatively stable, and other local refinery production adjustments are more flexible, but the interference with the license problem in June may also be more significant. In the case of the gradual depletion of land mines and the short-term difficulty of releasing a large amount of production capacity in sea mines, the year-on-year increase in Indonesia's Q2 tin ingot exports may not be high.
In addition, it is reported that Indonesia may stop the export of tin ingots at the end of this year, and if the policy is implemented, other regions will not be able to fill this part of the gap. In fact, the scale of Indonesia's tin downstream industry is relatively limited, and the probability of comprehensively restricting tin ingot exports during the year is small.
4.1.2 China: Refinery shutdown and overhaul, dragging down tin ingot output
Domestic tin ore stocks have accumulated. The mainland's imports of tin ore this year have increased significantly, the processing fee has risen to a certain extent under the loose pattern of minerals, and the output in April and May has increased as scheduled. Recently, large-scale domestic refineries have been shut down for maintenance, and tin ingot output may be further delayed. Recent spot transactions are not good, shipments are more difficult, a number of tin refineries announced the suspension of maintenance, the general maintenance time in about 1 month, it is expected that the decline in production in June will be more obvious, so that the first half of the year production has a year-on-year discount of nearly 1,000 tons, the conversion of continental ingots or further delayed.
4.1.3 Malaysia: The epidemic has recurred, and it is expected to return in the future
Malaysia's epidemic has been repeated this year, and tin ingot exports have also suffered a certain loss. As the epidemic situation improves, the country's tin ingot output is expected to return to the previous average.
4.1.4 Minsur (Peru and Brazil): Peruvian refinery overhaul
This year's Q1 Minsur tin ingot production fell by 5.6% year-on-year (mainly due to the reduction in Peruvian refineries), which was differentiated from the growth rate of tin ore production. Peruvian refinery tin ingot output fell by about 6.8% year-on-year, mainly due to overhauls in Q1, and there may be a balance in Peruvian tin ore stocks. Last year's Q2 Peru had the same number of maintenance days, according to which it is judged that this year's Q1 overhaul affected tin ingot production of about 1,000 tons. Considering that the company's tin ore production is generally stable and increasing, if the subsequent Peruvian refinery achieves normal production, the output of tin ingots will be repaired with a high probability.
4.2 There is a large surplus in the ore balance, and the smelting profit is relatively considerable
Due to the problem of overseas data samples, we consider the tin ore balance from the perspective of year-on-year changes. Looking at the surplus of tin ore supply year-on-year by about 7700 tons (considering the partial reduction in domestic refineries in the second quarter), due to the low base number last year (tin ore shortage, the industry has gone to the warehouse sharply about 7k tons), if the industrial inventory is considered to return to normal, then the actual surplus of minerals is limited.
First, domestic tin ore imports have increased highly, while tin ingot output is relatively slow, and tin ore inventory is concentrated in China. Recently, the refinery has been large-scale shutdown and maintenance, the pace of tin ore conversion has slowed down, it is expected that the second half of the year will gradually go to the warehouse, maintaining a small surplus of about 700 tons throughout the year, and on the basis of last year's tin mine destocking, it showed a higher excess level (about 8,000 tons). Second, from the perspective of rhythm, the increase in overseas minerals in the first quarter of this year was cashed, but tin ingots were damaged under the influence of factors such as the epidemic and maintenance, so the year-on-year performance was accumulated. In the second quarter, overseas tin ore exports remained at a high level, and tin ore inventories are expected to be significantly dematerialized. Entering the second half of the year, tin ore does not need to continue to export a large number of exports to The country, so tin ore gradually shifts to balance.
4.3 Under the current smelting profit, there will also be a slight surplus in the tin ingot balance
Tin ingots still have accumulation pressure in the second half of the year. Entering the second half of the year, terminal consumption is expected to recover month-on-month, but with the end of domestic refinery overhaul, tin ingot production is about to return, and there is still room for supply to match consumption, and we estimate that there will still be an order of magnitude close to 2,000 tons or 0.6% surplus in the second half of the year.
There is still a risk of oversupply of tin next year. Domestic consumption under the stimulus of cross-cycle adjustment policies has a high probability of chain repair; Foreign policies are differentiated from domestic ones, and there will still be downward pressure next year. Under the neutral assumption, the supply side remains stable, the consumer side increases by about 0.7% at home and abroad, and the market still has a surplus expectation of 0.3%.
Fifth, the rebalancing of the tin market - the need for low prices to curb supply
5.1 How does the price play a regulatory function?
In the case of a comprehensive surplus of tin elements in the future, it is undoubtedly necessary to adjust the function of "price discovery" to make the tin market return to relative equilibrium. So how will prices suppress supply to match demand? And what kind of price is required?
Ultimately, smelting profits need to be compressed to cut the output of tin ingots, and in the case of a relative surplus of tin ore, smelting profits do not have the conditions to be further squeezed. First of all, it is necessary to curb the production of miners by a certain amount of tin prices, reverse the surplus situation of tin ore, and compress smelting profits by reducing processing fees. The degree of price decline is related to the future excess, the larger the excess corresponding to the lower the suppression price, and the equilibrium price of this theory can be found from the tin ore cost curve.
In the next year or so, tin ingots are still close to 1% surplus, and after tin prices continue to fall, some tin mineral energy may be suppressed due to cost problems. From the perspective of the cost curve of mining enterprises, the current tin price is still enough to support the full production of mining enterprises, and if this part of excess capacity is to be discounted, the price needs to be as low as 21,000-22,000 US dollars / ton. (The cost curve is taken from the 2021 financial report of overseas mining enterprises, and there may be differences in the variable cost part so far)
5.2 Price Outlook
Based on the above analysis, the price suppression of supply cannot be achieved overnight, which means that the tin price fluctuation range will be re-upgraded in the second half of 2022, and the LME core is expected to run at (21000, 29000) US dollars / ton; The core operation of the domestic main contract is (160000, 230000) yuan / ton.
Risk points: domestic and foreign supply interference, consumption recovered more than expected, etc.
This article originates from Jinrui Futures Microservice