Mining Weekly

Global tin production will decrease in the coming years, subsequently increasing tin prices, which will have an adverse effect on South Africa, suggests research firm BMI Research mining analyst Diego Oliva-Velez.

The global outlook for tin from 2017 to 2021 is detailed in BMI’s ‘Tin Report’, released in July, which also details the company’s latest views on the tin market.

BMI expects global tin production, excluding that from China, to stagnate or drop over the projected timeframe, owing to depleting ore reserves globally, a lacklustre pipeline of mining projects worldwide and regulations hampering operations in key mining regions. This decline, Oliva-Velez adds, will push the global tin market into a widening supply deficit in the next five years, causing prices to rise. BMI forecasts tin consumption to exceed production by 4 700 t in 2017, rising to 10 200 t in 2021.

This outlook will affect South Africa negatively, owing to the country’s dependency on tin imports. Oliva-Velez indicates that, as of 2016, the country used about 1 000 t/y of tin.

The country has not mined tin for more than a quarter of a century, following the closure of its two main tin producers, Rooiberg Tin and Zaaiplaats Tin. Although there were tentative hopes in 2014 of a revival in tin mining, this has not materialised. Oliva-Velez notes that investment in the local tin sector is expected to remain subdued in the coming months, owing to several challenges that the country poses to miners.

He identifies these challenges as high labour costs and depleting ores, compounded by the country’s suspended new Mining Charter. This charter, if implemented, will impose significant costs on miners. In its current deferred form, the charter is problematic because it causes policy uncertainty, creating a tense climate in the mining industry.

Therefore, South Africa continues to source its tin from imports. Last year, South Africa imported 647 t of tin from China, 171 t from Malaysia, 125 t from Indonesia, 90 t from Singapore, 10 t from Brazil and 1 t from Germany, Oliva-Velez says.

He cautions, however, that the country’s Indonesian imports could be at risk of disruption in light of an increasing environmental crackdown on Indonesia’s tin mining sector, brought on by the depletion of resources and increasing environmental awareness. Compounded by restrictions on offshore mining, this environmental focus has BMI predicting a drop in Indonesia’s tin mining production in the coming years.

BMI projects a marginal decline in South Africa’s tin consumption in the coming years, with use expected to amount to 1 140 t in 2017, 1 060 t in 2018, 990 t in 2019 and 1 030 t in 2020. He cites rising global tin prices, which will naturally increase prices for South African tin imports, as the cause of its reduced consumption.

Tin Prices

BMI forecasts tin prices of $19 800/t in 2017 and $20 500/t in 2018, and notes that prices will increase gradually to $22 500/t by 2021 as the global tin market posts sustained market deficits from 2017 onwards and inventories dwindle.

Oliva-Velez expounds that tin prices will remain largely supported during the remainder of this year, because a sooner-than-expected global refined tin market deficit has set in since 2016. “Simultaneously, prices will be slightly boosted by spot levels during the coming months, as data reveals that Chinese consumption declined by an average of 2.5% in January and February, suggesting a short-term moderation of tightening fundamentals.”

He explains, however, that poor growth in output from major tin miners, such as PT Timah, in Indonesia, and Minsu, in Peru, will result in supply remaining tight overall. BMI predicts that the tin market will post production of 4.7-million tons this year, but expects

high levels of investor interest in the global tin industry in the coming years. Firstly, says Oliva-Velez, there is a strong demand for tin by the global electronics industry and, secondly, the tin industry is now less reliant on Chinese economic growth, which BMI predicts will wane in 2018. These factors have influenced BMI’s decision to include tin as one of its outperformers for the duration of 2017 to 2021.

Therefore, African producers, such as the Democratic Republic of Congo (DRC), will benefit from increased levels of investment in the coming years, he notes. For example, tin exploration and development company Alphamin’s Bisie tin deposit, in the eastern region of the DRC, is one of the largest and most significant deposits in the world, where first production of tin in concentrate is expected early next year.

He avers that, owing to globally depleting ore reserves, countries that boast significant reserves, such as the DRC, will be coveted to meet this demand.