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MALAYSIAN TIN REVIEW
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KUALA LUMPUR TIN MARKET (KLTM)

January was again a positive month for the KLTM when the tin price continued to uphold its bullish rally. With the continuing currency crisis, which is not likely to end in the short term, the KLTM is seen to be very attractive to foreign buyers. "The strong market sentiments and the sustained buying interests on the local market had helped maintained the high price," commented a dealer.

Exchange rate movements have continued to dictate daily prices on the KLTM which in general have maintained their upward direction, trading around the RM20.00/kg mark throughout December 1997, before rising to an average of RM22.47/kg in January 1998.

In US dollar terms, the KLTM price should have followed the downward trend of the LME cash tin price. Fears of being caught long, by sudden shifts in the exchange rate, continued to make the market nervous but have encouraged foreign traders to enter the market whenever the KLTM failed to respond correspondingly to price increases on the LME. Turnover, which fell continually from an average of 153 tpd in August to 66 tpd in December, recovered some ground in January to 97 tpd. However, this increase was mainly due to speculative buying at the beginning of the month and selling in the-run up to the Chinese New Year rather than any improvement in the underlying market confidence.

Meanwhile, the physical tin market remained tight on the back of a shortage of locally produced materials. Malaysian Smelting Corporation (MSC) continued to operate on the maximum 45 days delivery time allowed by the KLTM. High quality locally produced ore supply had been decreasing through-out the year which forced MSC to source 80-85% of its feed requirements from low and medium quality imported concentrates. Consequently, refining times have lengthened. The shortage of locally produced concentrates reflects a long term decline in the Malaysian tin mining industry, brought on by increasing costs, low grades and unremunerative tin prices.

Meanwhile, the depreciation of the ringgit has forced Perusahaan Sadur Timah Malaysia (PERSTIMA), Malaysia's sole tinplate producer, to opt for a 40% price hike in its first quarter tinplate shipments to local can makers. Despite Asia's economic and financial turbulence, tin consumption in Japan rose 3.7% in 1997 to 27,900 tonnes from 26,900 tonnes in 1996. The Japanese tin market continued to be supported by their solder, bronze and brass ingot sectors.

For the past several months, Asia continued to be hit by the currency crisis which created an economic instability in the region. Many analysts expect that a slump in the metal's consumption in Asia would be inevitable in the foreseeable future.

Although there had been many views predicting a rather bearish metals outlook for 1998, the potential for new uses of tin have shown to be encouraging. Demand for tinplate in Europe and United States had began mounting a fight back with a number of alumunium beverage can making lines being converted to tinplate. The tinplate food can is now being preferred due to its environmental friendly characteristic, and there have been burgeoning demand for it in China. Use of tin for zinc stannate fire retardant for plastic, particularly PVC, had also shown a growth of 12% per annum especially in the European countries. There had also been a significant growth in the tin content of vehicles batteries. It is hoped that these changing scenarios in tin consumption would bring back some light into the otherwise dull tin industry.

The KLTM ended its January trading month with an average tin price of RM22.49 per kg with the highest and lowest prices being RM24.68 and RM20.22 per kg., respectively. The turnover for the month averaged 97 tpd compared with 66 tpd in December.

LME AND NEW YORK MARKETS

After a massive built-up of some 5000 tonnes of LME tin stocks in December, there was some sign of recovery in the demand for the metal when LME tin stocks figures at end January showed a decline. At end of the month, tin stocks at LME warehouses totaled 12,100 tonnes compared with 13,040 tonnes at end December. Nevertheless, the tin market in 1997 was characterised by an oversupply. With the Asian economic crisis still far from settled, there have been some concern that the demand for tin in this region could inevitably decline in 1998, at least in the short term.

On January 19, tin price on the LME fell to its lowest level since August 1994 when the cash price registered USD 5090 per tonne. With the current trend of the metal taking its cue from the development of other metals, there is little by way of fundamentals that will create any excitement in the market. "The market is seeing little business and the whole base metals complex is weak. It is drifting along and waiting for direction from the other metals," said a trader.

Opinions over the outlook for tin remain mixed. Martin Squires, head of research at Rudolf Wolff & Co, commented that the tin price had not been as affected by the troubles in Asia as the other base metals, with the market having built a base around $5,400 during the second half of 1997 and after having been on a downward trend since early 1996. LME warehouse stocks had been in general decline throughout 1997, although the emergence of a large backwardation within the cash to three-month spread during November attracted over 5,000 tonnes of metal into LME warehouses, representing a 60% increase, said Squires. "Despite this rise in LME inventories, our outlook for tin remains largely unchanged, only a moderate increase in our forecast in market surplus is expected," added Squires.

The LME tin price ended the January trading month with an average cash price of USD 5,206 per tonne. The highest and lowest cash prices for the month were USD 5,405 and USD 5,090 per tonne, respectively. The three-month tin at the LME averaged USD 5,232 per tonne, with the highest and lowest prices being USD 5,400 and USD 5,120 per tonne, respectively.

In another development in the United States, the tin market's attention was focused on the annual Empresa Nacional de Fundiciones' (ENAF) tender. Around 9,000 tonnes of low lead tin (50-100ppm) from the Bolivian producer, Vinto, was made available to potential buyers. While historically, the ENAF tender had only been opened to a select group of buyers, 1998 saw the first fully public auction. Nevertheless, many traders regarded that the tender process was rather protracted and somewhat controversial with Allied Deals emerging as the principal beneficiary of the tender. It was awarded 320 tpm.

The other winners in the ENAF tender were Metallgesellschaft, which was awarded 200 tpm and Toyota which took 100 tpm. Another entrant for the Vinto material, Barex, was reported to have retracted its bid. A further 150 tpm of material from the tender would be sold directly to the Latin American market by Vinto. Any excess tonnages of tin were expected to be split amongst the three successful bidders.

The average New York spot tin price for the month of January was USD 5,498 per tonne, with the highest and lowest prices being USD 5,644 per tonne and USD 5,379 per tonne, respectively.

NEWS HIGHLIGHTS

Perak Lifts Freeze On Mining Leases

Perak has lifted the freeze on the issuance of mining leases because of the high price of tin in the world market. The about-turn began in late September when the spot price hit a high of RM18.62 a kg on the KLTM but miners and senior government officials were sceptical, arguing that it was a temporary phenomena brought on by the weakening ringgit.

Speaking to reporters after convening the weekly exco meeting yesterday, Menteri Besar Tan Sri Ramli Ngah Talib said the increasing price of tin had brought "a glimmer of hope" for Perak. "In fact, we collected cess amounting RM21,651.20 sen from the industry last month. "The revenue may be small, but it is a big thing for us because it is the first time that we managed to collect cess from tin ever since the downfall of the industry in the 1980s," he said, adding that the state used to collect RM30mil cess annually.

Ramli said if the tin price could hover above RM20 per kg, it was a good sign for miners and hoped to collect RM5mil in monthly cess from the sector by issuing 10 more mining leases. "Now, there are 18 leases throughout Perak. We are willing to issue 10 more but activities will only be allowed in old mining areas," he said. Ramly said newcomers to the sector must be wary of the risk involved as it would be costly to buy new machinery now.

"Both newcomers and the old players must conduct a detailed study, especially on how to lower their production cost in view of the competitiveness of other tin producers such as China which is able to produce tin at a cheaper cost," he said. "World tin stockpile may be inundated by supplies from such countries, forcing its price to go down," he added.

(Source: Star, 15 January 1998)

Study On Prospects Of Tin Industry

The State Government will undertake a study on the prospects of the tin industry before deciding on whether to allow miners to revive abandoned mines. Menteri Besar Tan Sri Ramli Ngah Talib said "a detailed study is important, considering that the bright outlook for the tin industry could only be temporary".

He was asked to comment on the call by the Perak Chinese Mining Association president Chin Lean Choong that miners were looking at the possibility of reviving abandoned mines in view of the projected increase in tin prices. Ramli said the recent increase in tin prices at the Kuala Lumpur Tin Market provided "a glimmer of hope" for the dwindling industry in Perak.


Chin said a detailed analysis of the annual world production and consumption showed that demand for tin had been outstripping supply by some 10,000 tones a year. The current world production is 215,000 tonnes while demand is estimated at over 225,000 tonnes. The price of tin is hovering between RM20 to RM23 per kg at the Kuala Lumpur Tin Market.

(Source: News Straits Times, 14 January 1998)

SUPPLY

Opportune Time Now To Step Up Tin Production: Miners

Malaysia should step up tin production as there is a short supply in the world market, Perak Chinese Mining Association president Chin Lean Choong said. Chin said that because of the shortage, tin prices were expected to increase next year. Since July this year, tin prices have steadily increased from RM14 per kilo to a high of RM21.13 on Dec 5. Since then, the Kuala Lumpur Tin Market (KLTM) price have hovered between RM18 and RM20.

"Admittedly, the rise in tin price is entirely due to the ringgit depreciation against the US dollar," Chin said when opening the association AGM in Ipoh. Chin said he hoped that the Perak state government would review its policy of land alienation for mining. "In view of the new scenario and the desire of the government to reduce our deficit, it is an opportune time to review the state policy of land alienation for mining. We believe that with our experiences, expertise and technology available, our country's minerals can be efficiently exploited for the general well-being of the country," he said.

Chin also said that many miners who had abandoned their mines were considering reviving their projects. "This sudden change of market outlook has rekindled the enthusiasm of many miners to pull their resources and management skills to start mining for tin and other minerals in the country," he said. "The only question now is the availability of mining land." Chin also hope the national mineral policy could be implemented soon to enable the mining industry to play a meaningful role.

(Source: Star, 1 January 1998)

Market Rally May Spur Tin Industry Revival

The rally in the tin price on the Kuala Lumpur Tin Market since the end of July 1997 might give some hope for the revitalisation of the mining industry. Tin price had been hovering between RM13 and RM20 last year compared to between RM14 and RM16 in 1996. Early this year, the tin price started on a stronger note as it hovered at the RM20 level and touched its peak at RM24.68 per kg on January 7.

Dealers attributed the uptrend of the metal mainly to the ringgit's depreciation against the US dollar. On the revitalisation of tin mining activities, an industry observer said that "it is viable so long there are tin ore deposits and virgin lands to be mined. "However, there are not much virgin land available for mining right now," he added.

He said as at September 1997, there were 35 mining units operating in Malaysia which mainly extract low grade tin ore from mines that have been tapped between 15 and 16 times. Production of tin-in-concentrate is anticipated to decline further by 5.3 per cent to 4,900 tonnes in 1997, against 5,174 tonnes produced in 1996, while consumption stands at about 6,000 tonnes per annum.

The industry observer said that if State Governments were willing to give virgin land for mining purposes then it would be viable for the miners to extract tin ore deposits from new mines, thus, increase their production. On the revitalisation of the tin mining industry, he said in terms of cost miners might have to pay more for mining equipment like water pumps, which are imported, due to the depreciation of the ringgit, but he added that at the end of the day they might get some profit.

He pointed out that only in Malaysia is tin enjoying a good price due to the depreciation of the ringgit while on the London Metal Exchange the price of three-month tin is still below US$6,000 (RM26,400) per tonne.

(Source: Business Times, 17 January 1998)



Miners In Perak Weigh Prospects of Reviving Tin Mines

Miners in Perak are looking at the prospect of reviving abandoned tin mines in view of the projected increase in the price of tin this year. The Perak Chinese Mining Association president Chin Lean Choong said a detailed analysis of the annual world production and consumption showed that world demand for tin had been outstripping new supply by as much as 10,000 tonnes a year.

He said the general consensus in the world market was that tin price would move upward in 1998. "If the projected consensus is true, many miners whose mines had been abandoned, would consider reviving them," he said, adding however that it would depend on their viability.

The current world production of tin is about 215,000 tonnes while demand is estimated at over 225,000 tonnes. Malaysia's tin production last year was about 5,174 tones while demand was in the region of 5,996 tonnes. Speaking at the opening of the association's meeting in Ipoh, he said the sudden change of outlook in tin price had rekindled the enthusiasm of many miners to pool their resources and management skills to start mining for tin and other mineral resources in the country once again.

The only question remaining now, he said, was whether there was mining land available. Chin said in view of the change in scenario it was appropriate for the State Government to review its policy of alienating land for mining purposes. It is learnt that the State Government has stopped renewing leases for mining land after the drop in the world tin price in 1985 and instead allocated the land to more productive uses such as development and agricultural purposes.

The association also hoped that the National Mineral Policy would soon be implemented so that the mining industry could play a meaningful role as a supplier of raw material and provide input towards the nation's industrialisation process. At present, there are only three dredges, 20 gravel pumps, 13 open-cast mines and one underground mine still in operation in the country of which one dredge, 11 gravel pumps and six-cast mines are found in Perak.

(Source: News Straits Times, 2 January 1998)

SPECIAL ARTICLE

Year Of Mixed Fortune For The Tin Industry

"It was the best of times, it was the worst of times," wrote Charles Dickens in the opening of his historical novel, 'A tale of two cities'. The Victorian novelist's description of the vicissitudes of life in the great social upheaval surrounding the time of the French Revolution is an apposite summary of the tin industry's fortunes in 1997.


Who could have foreseen that quotations on the Kuala Lumpur Tin Market, still struggling below RM14/kg throughout July, would end the year touching a nine-year peak of RM20/kg. That this should occur in the first full year free of export quotas, in force from March 1987 to June 1996, says much for the efforts of the Association of Tin Producing Countries (ATPC) in the management of their supply rationalisation scheme which has successfully reduced the burdensome stock overhang inherited from the International Tin Council's buffer stock.

The tin trading community, which dubbed the ATPC "a toothless tiger," have been answered by the market and whether the Association's role mutates from market stabilisation to study group status is less an issue than that it continues to remain in being. China, which has assumed leadership of the ATPC, is now the dominant force in tin supply, with 1997 seeing such erstwhile tin majors as Malaysia and Thailand assume the status of net tin importers.

On the basis of incomplete returns, both Indonesia and Peru are expected to record post-war high tin output in 1997 and again on partial returns, world consumption is likely to have exceeded mine output by more than 20,000 tonnes. Total reported stocks of refined tin , at around 23,000 tonnes, are now down to little more than one month's normal commercial demand and the US stockpile, once a daunting arsenal of 330,000 tonnes, marked the passage of 1997 by falling below 100,000 tonnes.

After years of dominance in the huge beverage can market, aluminium faced a sustained counter-offensive by those with tinplate interest, with China and Brazil commissioning their first tinplate beverage canmaking lines. Meanwhile, US brought on stream the first new tinplate line for more than 30 years, at Yorkville (Ohio) and the South Africa's Iscor converting a tin-free steel line to tinplate boosted by substantial investment in new tinplate capacity announced by the US, China, Australia, South Korea, Indonesia , Norway, Portugal and Turkey.

The knock-on effect of all these additional tinplate facilities is a ringing endorsement for the continuing dominant role of tinplate in packaging and, by extension, very positive pointers to rising tin demand in its traditionally dominant end use. As "Metal Bulletin Monthly" recently summed up: " ... the steadily rising investments in tinplate and electronics manufacturing in the industrialising world, aided by user-friendly prices, augur well for long-term use of the metal."

In an end-year review of developments published in "Tin International", Itri's managing director, Rod Bedder, cited 12 per cent annual growth in demand for zinc stannate fire retardants for plastics, growing market share for pure tin shot for shotgun cartridge, significant growth in the tin content of vehicle batteries and, overall, a three-year growth in world tin consumption for new applications of about 15 per cent.

(Source: Business Times, 31 December 1997)

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