Why is Tin Valuable?
Tin is an element that, when refined, is a soft, pliable, silvery-white metal. It resists corrosion and, therefore, is often used as a protective coating for other metals. Tin also forms useful alloys with many other common metals including copper.
Archaeological evidence shows that tin was first mined and processed in Turkey around 3,500 BC.
Ancient metalworkers discovered that combining tin with copper formed a strong alloy (bronze) that could be crafted into durable weapons and tools. This discovery ushered in the Bronze Age, which lasted for the next 2,000 years.
Other civilizations around the world soon began using tin in a variety of ways. Metalworkers on the peninsula where Thailand is now located were producing bronze from tin around 1,600 BC.
The metal was discovered in relics in Mexico and Peru that date prior to the Spanish conquest of the 1500s. In the Roman Empire, tin served as a plating material to help keep copper vessels bright.
The modern era also saw its share of important innovations in tin usage. In 1839, American inventor Isaac Babbitt created an alloy of tin, copper, and antimony that was adopted for use in bearings. The new alloy helped facilitate the development of high-speed machinery and transportation.
In 1952, the English glassmaking firm Pilkington invented a revolutionary way to produce perfectly flat sheet glass using molten tin as a key part of the production process.
Today mines worldwide extract more than 280,000 metric tons of tin annually. Manufacturers use the metal in applications ranging from soldering to plating to alloys. As a result, tin is a key industrial metal in global markets.
How is Tin Produced?
The supply of tin derives from two sources:
primary production (mining) and secondary production (recycling). Mining provides most of the supply, although the United States Geological Survey (USGS) estimates the quantity recovered from recycling in the United States represented 30% of total consumption.
The earth’s crust contains nine tin-bearing ores. However, only the opaque and translucent cassiterite ore contains enough of the element for viable commercial production of tin.
Tin mining techniques vary by location of the deposits. In Bolivia and England, where deposits reside deep beneath the surface, miners use tunnels to reach the ore. Deposits in these locations usually contain between 0.8% and 1.0% tin by weight.
In Indonesia, Malaysia and Thailand, gravel along streambeds contains tin ores. Dredges and pumps remove these ores, which may contain as little as 0.15% tin. Gravel deposits account for more than 80% of global tin production.
Once miners extract tin ores, they go through a series of chemical filtering steps to obtain increasingly greater concentrations of tin.
Revolving screens and shakers dredge the gravel and separate the tin ores from sand and other debris.
If the deposits are located above the water level, then water jets break up the rocks and trap the mixture in artificial ponds. Pumps then send the mixture into wooden troughs. Wooden slats called riffles trap the tin ore and separate it from sand and debris.
The ores first pass through vibrating screens, which remove coarse foreign particles. Next, classifying tanks filled with water perform further filtering. Sometimes, mining facilities use flotation tanks containing chemicals for additional filtration.
The concentrated tin is placed in furnaces with either coal or fuel oil. The materials are then heated to a temperature of about 2,550 degrees Fahrenheit.
At this point, carbon in the furnace reacts with carbon dioxide to produce carbon monoxide. The carbon monoxide then reacts with the cassiterite to form crude tin and carbon dioxide.
Sometimes blast furnace slags – residual products from heating tin – form in the furnace. These products get heated again in a second furnace to recover additional tin.
Crude tin from the smelting is placed in a low-temperature furnace. Tin has a much lower melting point than other metals. As a result, when refiners raise the temperature in the furnace, the tin melts, while other metals in the mixture remain in solid form.
Poling kettles collect the tin in a process known as liquidation. The molten tin is then boiled to remove additional impurities. At this stage in the process, the tin is 99.80% pure.
If applications require even higher purity, electrolytic refining plants can use electrical currents to remove the remaining impurities such as bismuth and lead.
Recycling tin is an economically viable activity. In the United States, two de-tinning plants and 75 secondary, non-ferrous metal-processing plants processed more than 80% of the recycled tin in recent years.
China is the leading tin mining country in the world. It produces more than 30% of the annual supply of the metal.
Top 10 Tin Mining Countries
|Rank||Flag||Country||Thousands of Metric Tons|
These are the reserves of each country as reported by the USGS:
Which Countries have the Most Tin?
Tin has two forms in which it occurs:
White Tin: A malleable silvery-white metal that occurs at room temperature.
Grey Tin: A powdery, brittle substance that occurs at low temperatures.
White tin has a number of industrial applications, while grey tin has no known uses.
4 Main Uses of Tin
|Coating Metal||The resistance of tin to corroding makes it a popular choice to coat other metals. Tin cans, for example, are made of aluminum or steel and coated with tin.|
|Alloys||Tin combines with other metals to form strong alloys. Soft solder, pewter, bronze and phosphor bronze are examples of common tin alloys. Niobium-tin alloys produce superconducting magnets.|
|Window Glass||The Pilkington process uses a molten bath of tin to produce flat sheet glass.|
|Tin Chloride||This tin salt is used as a reducing agent and as part of the process for dyeing calico and silk.|
What Drives the Price of Tin?
The price of tin is driven mostly by these five factors:
- Soldering Demand
- Global Stocks
- Chinese Supply and Demand
- Government Policies
- Input Prices
Approximately 50% of the world supply of tin is used in solder, although this number has been declining in recent years.
In the early- to mid-2000s, tin demand remained strong as manufacturers replaced lead with tin in soldering applications. However, beginning in 2012, falling demand for consumer electronics and appliances caused a decline in tin demand.
Trader should pay careful attention to demand for applications that require soldering for clues about future tin prices.
The London Metals Exchange (LME) keeps track of global stock levels for tin and other industrial metals. Traders follow these inventory levels closely for clues about supply shortages or surpluses.
If inventory levels drop, the market may be facing a shortage of tin supply in the near future. This could lead to higher prices for the metal. Similarly, if stockpiling occurs and inventory levels expand, then the market might face an oversupply of the metal, which can lead to lower prices.
One interesting development with base metals such as tin is the increasing importance of inventories held at the Shanghai Futures Exchange (SFE). Traders should monitor the change in tin inventories at both exchanges for clues about tin supply and prices.
Chinese Supply and Demand
China is the world’s largest tin consumer and supplier, so activity in this country can affect tin prices.
In recent years, the Chinese economy has slowed from its torrid pace of growth over the previous 15 to 20 years. As a result, China’s appetite for a variety of base metals has waned. For tin prices to perform well, the Chinese economy will need to accelerate its growth rate.
Another factor impacting tin in China is the country’s increasing environmental awareness. Poor air quality in China has forced the government to take a harder look at the mining industry as a contributor to pollution.
New environmental standards in China can impact the price of tin in two key ways:
- The regulations can reduce the supply of refined tin exported from the country. (This would support higher tin prices).
- It could reduce the demand for tin ore imports into China since these require pollution-producing processing. (This could lead to lower prices).
Government trade policies can impact tin prices.
Historically, Indonesia has been a leading exporter of tin. However, the country has also banned tin exports in recent years. The rationale for this policy was a desire by the government to support the domestic smelting industry. Ultimately, budget deficits in Indonesia led to a resumption of exports.
Actions by the Indonesian government and other leading tin producers can impact supplies and prices.
Tin occurs in cassiterite ore bodies, and breaking down these ore bodies to extract the metal expends energy. Producing tin requires ample supplies of coal, electricity and crude oil.
Mines and blast furnaces utilize energy to extract tin ores from the ground and process it into tin. These costs can have a big effect on primary production. Similarly, the costs of scrap metal can impact the price of secondary production.
3 Reasons You Might Invest in Tin
Investors should consider buying tin for the following reasons:
- Bet on Surging Global Economy
- Inflation and Weak US Dollar Hedge
- Portfolio Diversification
Bet on Surging Global Economy
Expanding global demand for soldering, tin alloys, and tin-plated materials could contribute to a rise in tin prices.
For this scenario to unfold, China would have to resume its strong growth. The Chinese economy has experienced a slowdown in recent years, although there are signs this may be coming to an end. Essentially, investing in tin and other base metals is a bet on a resurging Chinese economy.
Inflation and Weak US Dollar Hedge
Investing in tin is a way to bet on a weak US dollar and higher inflation.
Tin is priced in US dollars, so the performance of the American economy can impact its price. The US Federal Reserve Bank has kept interest rates low and the US dollar weak for many years.
US central bankers are likely to continue these policies to support consumer borrowing and spending. These conditions are likely to be very beneficial for commodity and base metal prices.
A weak dollar could stoke inflation concerns. There is a limited supply of tin, and producing it is an energy-intensive endeavor. The price of the commodity would likely benefit from fears of inflation.
Most traders have the vast majority of their assets in stocks and bonds. Commodities such as tin provide traders with a way to diversify and reduce overall portfolio risk.
Should I Invest in Tin?
Traders that want to invest in tin should consider purchasing the commodity as part of a basket of commodities that includes other base metals (i.e., copper, lead, nickel, and zinc), precious metals, agricultural commodities (i.e., dairy, meats, and grains) and energy.
Purchasing a basket of commodities helps protect traders from the volatility of any individual commodity. It also adds overall diversification to a stock and bond portfolio.
There are three specific trends that could raise tin prices in the years ahead:
China is the top consumer of tin, and demand should grow if the Chinese economy rebounds.
Electronics have become an important mainstay of consumer spending. These products require tin for soldering components. Growth in this category should bode well for tin demand.
Higher energy costs make mining an increasingly challenging business. As fuel and electricity costs rise, more mining operations could close or consolidate. This should produce higher tin prices.
However, traders should also consider the risks of investing in tin:
- A global recession could weaken Chinese demand.
- Overproduction or increased stockpiling by China could create a supply overhang on the market and send prices lower.
- Global economic or political turmoil could strengthen the US dollar and weaken demand for commodities.
Expert Opinions on Tin
One leading tin analyst predicts modest gains for the metal in the near future. He believes stricter Chinese environmental regulations could reduce output and keep the metal in a supply deficit over the coming month. However, he believes the market has anticipated much of this news, so gains could be muted:
“Despite the shortfall, prices will increase marginally, as tin has been suffering from a chronic deficit, which has already been penciled in by the market.”
Ricard Torné, head of economic research, FocusEconomics
One tin mining CEO expects an even larger supply deficit to emerge and prices to react positively:
“We would expect a more modest rise in tin prices as the market remains in deficit.”
Warren Hallam, CEO, Metals X
How Can I Invest in Tin?
Investors have several options for gaining exposure to tin prices:
Tin Trading and Investing Methods Compared
|Method of Investing||Complexity Rating (1 = easy, 5=hard)||Storage Costs?||Security Costs?||Expiration Dates?||Management Costs?||Leverage?||Regulated Exchange?|
Physical tin bullion such as ingots is the most direct way to invest in tin. However, investing in bullion requires a secure storage facility. Ultimately, the cost of this storage and the low value-to-weight ratio make holding physical tin an impractical proposition.
The LME trades a contract on tin that is a minimum of 99.85% pure. Each contract represents 5 metric tons of tin and is quoted in dollars.
Futures are a derivative instrument through which traders make leveraged bets on commodity prices. If prices decline, traders must deposit additional margin in order to maintain their positions. At expiration, the contracts are physically settled by delivery of the metal.
Investing in futures requires a high level of sophistication since factors such as storage costs and interest rates affect pricing.
Tin Options on Futures
The LME offers an American style options contract on tin futures.
Options are also a derivative instrument that employs leverage to invest in commodities. As with futures, options have an expiration date. However, options also have a strike price, which is the price above which the option finishes in the money.
Options buyers pay a price known as a premium to purchase contracts. An options bet succeeds only if the price of tin futures rises above the strike price by an amount greater than the premium paid for the contract. Therefore, options traders must be right about the size and timing of the move in tin futures to profit from their trades.
These financial instruments trade as shares on exchanges in the same way that stocks do. Investors can purchase iPath Dow Jones-UBS Tin ETN (NYSEARCA: JJT), which is an ETF that invests in tin futures.
|iPath Dow Jones-UBS Tin ETN|
Shares of Tin Companies
The vast majority of tin production takes place in emerging markets. Investors looking to gain exposure to tin prices through the purchase of shares should consider the following emerging market producers:
One way to invest in tin is through the use of a contract for difference (CFD) derivative instrument. CFDs allow traders to speculate on the price of tin. The value of a CFD is the difference between the price of tin at the time of purchase and its current price.
Some regulated brokers worldwide offer CFDs on tin. Customers deposit funds with the broker, which serve as margin. The advantage of CFDs is that traders can have exposure to tin prices without having to purchase shares, ETFs, futures or options.
- No commission on trades (other charges may apply)
- Free demo account
- Easy to use (mobile-friendly) platform
- Industry-leading risk management tools
- Trade hundreds of CFDs
- Your funds are safe – publicly listed company regulated by the UK’s Financial Conduct Authority and Cyprus’ Securities and Exchange Commission
Important: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail trader accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.