Finance Association, April 18 (Editor: Xiaoxiang) From cocoa to crude oil, from gold, silver and copper under the “periodic table of elements” to aluminum and nickel under British and American sanctions against Russia, more and more commodity categories have recently made headlines in mainstream financial media. Currently, there is one type of metal that has not received much attention from the industry, but has already caused a sharp rise in the market. It may also become a new “dark horse” stirring up the market for some time to come — that is tin.

According to market data, LME tin prices have soared by nearly 20% so far this month, and the increase further expanded to 25% during the year, far outperforming commodities such as copper, gold, and crude oil, which have received more widespread attention from investors.

Behind the rapid rise in tin prices, there are actually a series of unique fundamental reasons. For example, the supply of tin in major producers Indonesia, Myanmar, and the Democratic Republic of the Congo has recently been severely disrupted; on the demand side, many analysts say that as the global AI boom increases demand for computing power, demand for electronic products will expand, and tin will also benefit from this.

In the electronics industry, tin alloys are mainly used to manufacture welding materials and electronic components.

However, investors need to be particularly reminded that behind these changes in the traditional metal market supply and demand relationship, discussions on the tin market in recent weeks have focused more on the role of a single bullish trader's position in driving the market. In the midst of silence, the trader recently strengthened his “control” of the LME tin market.

According to exchange data reviewed by the media, the entity currently holds at least 40% of LME tin long positions for May delivery. This data does not identify the holders of positions.

What do the mysterious guys want?

According to statistics, this concentration of positions has not been seen since 2017, and is at least equivalent to 90% of current LME inventory holdings. And as the May contract expires, many short position holders may find themselves in a difficult situation: there is not that much spot tin available for delivery; they can only close their positions.

An industry source said, “Some market participants think there may be a risk of shorting out. They are closely monitoring the movements of most parties in the May contract.”

Commodity markets, especially in markets with poor liquidity such as tin, are prone to cyclical shortfalls. In this case, the price will soar for a short time as bears are forced to stop losses. The most typical example of this is undoubtedly the “monster nickel crisis” that occurred in March 2022.

Just this time, who would it be to play a character similar to Glencore — the “mysterious bulls” trying to push the bears to a dead end?

In fact, LME has now acknowledged the tight supply in the tin market and told the media that it is closely monitoring the market.

According to LME emails seen by the media, LME said that it has taken necessary control measures to ensure that the market continues to be orderly. The exchange also listed and explained its restrictions on recent monthly price spreads, delayed delivery procedures, and mechanisms to control fluctuations.

Maybe the price of tin hasn't finished rising yet?

In fact, even leaving aside the mysterious bulls, the current wave of rising tin prices is probably far from over.

Indonesia is the world's largest exporter of tin. Due to delays in licensing and high-profile corruption investigations, many tin smelter executives and traders have been implicated, and Indonesia's tin exports have declined.

In addition, tin production in Myanmar, the world's third-largest tin producer and ravaged by civil war, has also slowed; tin production in the Democratic Republic of the Congo is also facing disruptions due to armed unrest.

On the demand side, the growth of the global artificial intelligence industry has brought potential benefits to metals widely used in electronics and electrification, and tin is also in this category. Due to its good conductivity, moderate melting point, and stable chemical properties, tin is widely used in the connection and welding of electronic components, such as the manufacture of circuit boards and the packaging of electronic components. In addition, metallic tin is also used to manufacture electronic devices such as electronic tubes and transistors, as well as insulating layers for cables and wires.

“Every byte of data and every electron goes through hundreds of solder joints, which connect all the data,” said Jeremy Pearce, head of market intelligence and communications at the International Tin Industry Association. “Although it is challenging to accurately estimate demand at this stage, the basic idea is that computing and communication systems will require more tin.”

So far this year, LME tin stocks have dropped 47% to 4,045 tons. The metal's term structure has now shown a spot premium — the spot price is higher than the three-month futures contract, indicating tight market supply.

The LME tin contract climbed to its highest point since June 2022 on Friday, while the number of open positions reached the highest level since 2015. As of Wednesday's Asian session, the price of LME tin had little change this week. The latest report was around US$32,940 per ton.

Recently, there have been clear signs that speculative bets on LME tin have been increasing, with hedge funds, asset management companies, and other financial institutions entering the market. The total net long positions held by these institutional investors have risen to the highest level since LME began publishing such data in 2018. Together, these long positions held by traders who rarely participate in physical tin trading currently account for 69% of all bullish bets.