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In terms of the Chinese market, market signals still reflect an oversupplied domestic balance, with the import arbitrage window remaining firmly shut since November last year. This likely points to sustained weakness ..

19 Feb 2013

LONDON (Commodity Online): Until more constraint is seen in Indonesian export levels or the Chinese market re-tightens enough to support a rebound in import levels, the market is likely to remain in surplus, stated a recent market outlook by London based Barclays.

In Indonesia, January exports increased 70% y/y, to 9.2Kt, 1Kt above the 2012 monthly export average. This was achieved despite PT Timah reporting disruptions to production from monsoon conditions at the turn of the year. It is still unclear what the volumetric impact of new minimum-purity tin ingot export rules will have on exports when they are applied from July this year. This is likely to be a key risk to a significant lightening in H2.

LME tin prices have essentially plateaued in February, as the market consolidates following a near 20% rise during the
previous two months. As Barclays commented earlier, the incongruence between clear signs of a surplus dynamic and rising prices created an untenable divergence. Given that LME stocks have continued to rise, also up close to 20% over the past two months

In terms of the Chinese market, market signals still reflect an oversupplied domestic balance, with the import arbitrage window remaining firmly shut since November last year. This likely points to sustained weakness in import levels in Q1 13, with previous similar periods pointing to a drop in refined imports to about 1Ktm from the 3Ktm seen in H2 12.

On the supply side, the strength in domestic refined production, at 15.3Kt (+63% y/y) in December, will not have helped the destocking of close to 18Kt stockpile built in 2012. On the demand side, there were few signs of revival ahead of the Chinese New Year, with data showing that production and sales of home appliances were flat, at best, during December. Indeed IOL data showed rural subsidised home appliance sales falling to their lowest since April 2011.


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