LONDON (Commodity Online): Tin prices may be in for some consolidation after a 30% rise this year to the highest levels since August. The fundamentals offer a broadly bullish story for 2012 with supply deficits in six of seven years, said Barclays Capital in a research note.
According to Barclays, still, the premium of domestic Chinese prices to the London Metal Exchange has fallen from an average $6,600 a metric ton in the fourth quarter to $4,600.
“The implication is that there has been a shift from a wide-open import arbitrage window during the back-end of 2011, to now facing a much more limited profit motive to import under the current price spread,” Barclays added.
“Taken alongside indications that tin consumption in China is currently soft, with Antaike reporting few transactions either side of the New Year’s holiday, we would anticipate import levels into China softening over the coming months, which in turn should moderate the pace at which LME stocks have been drawn,” Barclays continued.
The sustained draw in LME stocks in January (some 2,800 metric tons or 23% month on month) suggests that Chinese imports remained strong during that period; given Asia was the focus for cancellations. However, “current market signals point towards lower levels in the February-March period or at least until domestic demand conditions improve,” Barclays concluded.
