Market Briefing - September 4, 2009

Prices picked up to levels as high as $15,700/tonne at the start of August, driven by positive economic data and the willingness of funds to hold on to commodity positions. The tin price was strong in August, averaging $14,870/tonne, down on the level of close to $15,000/tonne seen in June but up 5.9% on the July average. We have continually noted that prices are ahead of the fundamentals, and did show signs of easing over the end of August and into September in line with slackening demand over the summer slowdown period, slipping to $14,050/tonne on September 2.

The much debated backwardation continued to persist in the tin market, with the premium for cash material over the three month price at $250/tonne on September 2. This compares to around $40/tonne in mid-June. The premium is even larger when compared to contracts dated further out.

As we have consistently noted, the persistent backwardation in the tin market, indicative of the market being in a short-term deficit, is at odds with the latest data showing the market in over-supply. Recent data from the WBMS shows the market in a 6,300 tonne surplus over the first seven months of the year, as compared with a deficit of 7,600 tonnes over the same period in 2008. Stocks on the LME increased by 1,970 tonnes over August to end the month on 20,345 tonnes, which largely reflects the weakness in demand more than a pickup in supply, although Chinese production is increasing. Nevertheless, the pace in the acceleration of stocks slowed in August in comparison to the previous month when they surged by 2,650 tonnes. For the year as a whole, inventories have increased by over 12,500 tonnes.

> This article gives the introduction to our latest detailed analysis on the market. To access a full version of a recent detailed monthly report on the base metals markets plus a recent briefing update, click on the links below.

> Base Metals Market Briefing - December 9, 2008.

> Base Metals Market Briefing Update - December 16, 2008.

Disclaimer: Whilst every effort has been made to ensure the accuracy of the information used in this document, GFMS Metals Consulting cannot guarantee such accuracy and GFMS Metals Consulting does not accept responsibility for any losses or damages arising directly, or indirectly, from the use of this information.