London Metal Exchange tin took the spotlight Wednesday, surging nearly 4% due to ongoing supply concerns in Indonesia, illiquid market conditions, and speculative buying, with analysts questioning whether the market will hold onto those gains in the near term.
Ongoing supply concerns in the world's largest tin producer, Indonesia, helped push prices sharply higher while thin post-Christmas holiday trading conditions exacerbated the gains, an LME trader and analyst said.
Three-month tin rose to an all-time high of $11,550 a metric ton, up over 3.5% from Friday's PM kerb, before retreating to a PM kerb of $11,500/ton.
Speculative buying helped push tin prices higher, said Michael Skinner of Standard Bank, but this move is largely a function of the illiquidity of the market, with so many trade participants out for the holidays. The key question will be whether tin prices hold these gains over the next few days, he added.
Other traders have pointed to ongoing supply concerns in Indonesia as reason even higher prices may be to come.
According to a recent news report, the Indonesian government may move to limit exports of refined tin in 2007 because of quality problems. In October, the Indonesian government moved to shut down illegal tin smelters, citing a lack of licenses.
William Adams of BaseMetals said tin prices continue to look strong, particularly if the clampdown on illegal tin miners in Indonesia lasts.
Elsewhere, general trading activity on the LME remained light, said analysts.
LME copper gave up earlier gains, falling from Wednesday's high of $6,449.75/ton to a PM kerb of $6,375/ton.
In news, Chile's copper production totaled 477,054 tons in November, unchanged on the year, government statistics institute INE said Wednesday. In November 2005, the South American country mined 476,975 tons of the red metal.
Chile is the world's largest copper producer, accounting for some 37% of world output.
In other news, the Chinese government said Wednesday that the country will keep export taxes on refined copper unchanged at 10% next year. However, export duties on copper alloy will be cut to 5% from 10%, and those on copper products such as copper bars, rods, plates, sheets and strips will be removed, the Ministry of Finance said in a statement outlining the provisional tax rates for 2007.
But the Chinese National Development and Reform Commission said that China's copper consumption is estimated to total 3.4 million tons in 2006, down 7% from last year.
Meanwhile, three-month zinc held onto earlier gains, maintaining the $4,200/ton price level due to bargain-hunting, short-covering, and a decrease in LME stocks. According to LME data, zinc stocks fell 775 tons to 87,575 tons Wednesday.
Three-month aluminium prices rose modestly from Wednesday's low of $2,798.5/ton to a PM kerb of $2,820/ton.
Total world aluminium inventories in November 2006 fell by 39,000 tons to 2.837 million tons, from 2.876 million tons in October, according to figures released Wednesday by the International Aluminium Institute.
November's figures were down 370,000 tons from November 2005 inventories of 3.207 million tons.
3 months metal (prices in dollars a ton)
Bid – Ask, Change from Friday PM kerb
Copper 6375.0-6380.0 Up 50
Lead 1630.0-1635.0 Up 20
Zinc 4205.0-4210.0 Up 70
Aluminium 2820.0-2825.0 Up 21
Nickel 33500.0-33550.0 Up 100
Tin 11500.0-11550.0 Up 450
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