On Monday 17th April, tin prices increased by over 10% on both the Shanghai Futures Exchange and London Metal Exchange following news of tin mining being suspended in Myanmar. The country announced all mining activity, including exploration and processing, would be suspended from August in a document seen by Reuters. Myanmar has been sidelined in both global and regional geopolitics through sanctions since the military coup of February 2021, and yet the reaction to the recent announcement shows the nation’s importance in the global tin market. This week’s blog will look into Myanmar’s significance for tin supplies, what is currently known about the mining ban and how this situation may develop in the near future.
Tin Mining in Myanmar
Myanmar has a long history of mining tin, with the metal being one of the country's most important exports. Tin production peaked in the 1970s, but then declined due to a lack of investment and technological advancement. While the industry seemed to have faded from global significance by the end of the twentieth century, huge amounts of ore and concentrates from Myanmar began appearing in China’s import data around a decade ago.
Over the last ten years, the country has cemented itself as the third largest tin-producer, after China and Indonesia. According to the 2023 report on tin by the United States Geological Survey, production in the country stood at 36,900 tonnes in 2021 and 31,000 tonnes in 2022, constituting over 10% of global production in both years. The majority of the nation’s tin production comes from the Wa State, self-declared autonomous regions within Myanmar that are run by the United Wa State Army (UWSA), but nonetheless still acknowledge the sovereignty of Myanmar over its territories.
To further contexualise tin from the Wa State in the wider market, it is worth noting that in 2022 China accounted for almost half of global tin consumption; around 77% of China’s tin ore imports in 2022 were sourced from Myanmar and therefore primarily from the Wa State. While China has diversified its tin sourcing strategy in recent years, with imports from Myanmar having constituted almost 100% of total tin imports only a few years ago, the recent ban will shock the supply chain for the metal.
Soldering Tin to a Circuit Board
The known information about the mining ban has primarily been reported by Reuters and the International Tin Association (ITA). The proposed ban stems from the Wa State Central Economic Planning Committee, and would allow companies with valid contracts to continue their work within the country until 1st August 2023. Given that tin mining constitutes a major revenue source for the Wa State, it is currently unclear what is the intended outcome of the ban. Indeed, the ITA commented that “it is still unclear how and if these plans will be implemented”. However, one thing that is already clear is that the global tin market was not expecting this kind of supply shock. China-based Yunnan Tin, the world’s largest tin refining company, told Reuters that it would be “closely monitoring the Chinese raw material supply” and that it would make “timely adjustment to its operations” in response to supply disruptions on the actual implementation of the ban.
Prices for tin shot up on both the SHFE and LME benchmarks. Andy Home noted the extremely high level of recent tin trading on the Shanghai exchange, with March’s open interest volumes of 5.34 million tonnes being “14 times greater than last year's global production of 380,000 tonnes.” The metal has attracted greater trading volume in recent years following its two-year bull run from March 2020 to reaching record highs in March 2022, peaking at $48,865 on the LME on March 8th. The price spike on Monday across both exchanges reflected the number of bearish market participants that were caught out by the supply side shock. While there was a period of upwards price movement from November 2022 until January 2023, this rally was largely driven by the strengthening US Dollar and premature anticipation of a post-Covid demand surge from China. Until the announcement from Myanmar, the market fundamentals had suggested that tin prices should remain stable in the immediate future, however this has now been thrown into doubt.
SHFE Tin Stocks vs LME Tin Price since April 2021, shown in ChAI’s Driver Detail chart
Markets will be closely watching for further information from Myanmar as to why, how and, most importantly, if the ban will be enforced. While registered tin stocks on the Shanghai Futures Exchange are at their highest for 2 years, which should reduce some of the supply-side pressure in the short term, the overnight exit of Myanmar’s contribution to the global tin market would cause further upwards price movements.
The announcement from the Wa State has also come during an era where Indonesia, the second largest tin producing nation, has been restricting imports of key commodities in order to encourage investment in downstream activities, such as refining and smelting. It remains to be seen whether this is the intention of the Wa State, but the threat of two key producing nations reducing their exports may add further uncertainty to the market.
A key driver of tin prices that is yet to recover to full strength is the demand driven by manufacturing electronics and semiconductors. Tin is vital to electronics industries through its role as solder, and while this subsection of China’s economy is yet to regain its full strength following its repressive Zero-Covid policy, it does represent a sleeping giant in the tin market.