Tin prices hit record highs March 8 but quickly gave up their gains, mirroring the volatility in the broader commodities market amid Russia's invasion of Ukraine.

Tin, an essential metal for soldering electronics that has applications in solar panels and batteries, had a meteoric rise over the past year that echoed that of other metals key to global decarbonization efforts. Prices rose even further after Russia invaded its neighbor on Feb. 24, triggering fears of global supply problems.

The three-month price closed at $49,500 per tonne on the London Metal Exchange and the cash price for 99.85% tin closed at $48,865/t on March 8 — a record for both, according to S&P Global Market Intelligence data.

Futures experienced a drastic correction the next day, falling more than 20% at one point in after-hours trading, and closed March 22 at $41,400/t and $41,534/t cash.

The trigger for tin's drop "appears to have been a combination of profit-taking at highs of $51,000/t and risk reduction related to problems in the LME nickel market," James Willoughby, the England-based market analyst for the International Tin Association, or ITA, said in a March 10 note.

A frenzy of nickel trading at the LME led to nickel trades being suspended March 8, the same day tin reached its price record.

An 'extremely thin' market

Small production increases or decreases can cause a dramatic price impact in commodities like tin, where inventories are "extremely thin," Peter Arden, founder of research firm Groundwork Pty. Ltd., told Commodity Insights.

"There has been absolutely no metal available. That's why the price has been driven up as much as it has," Arden said. "Tin prices had run [hot] in 2021, but this year they also got caught up in the Russian invasion which has definitely had an effect in all commodity markets."

The ITA, a trade group for tin producers, considers Russia a "relatively significant" tin producer, but not a major one, Willoughby said.

Russia was expected to have contributed just 3,500 tonnes of the 300,000-tonne world total of mined production in 2021, according to the U.S. Geological Survey's latest annual report.

The invasion has had "almost no direct impact" on tin prices but does appear to have had knock-on effects on tin, the ITA said.

"Indirect impacts include increased oil and gas prices globally (but particularly in Europe), as well as some shipping delays," Willoughby told S&P Global Commodity Insights in an email interview. "Other markets are being impacted, which are in turn impacting tin."

The S&P GSCI index, which tracks 24 commodities, reached its highest point since 2008 on March 8 but has receded as fears of supply disruptions eased.

Demand for tin is soaring because it is a critical metal in electronics, particularly semiconductors. Source: Thinkstock

Tin prices to stabilize

A new wave of COVID-19 in China is expected to hurt demand for tin, and global inflation could slow the overall economy, suggesting tin prices "will face correction pressure in the short term," the ITA's Beijing-based market analyst, Daniel Xia, told Commodity Insights in an email interview.

At the same time, tin production in Indonesia and Malaysia rose in recent months. Malaysian production has recovered since the world's third-largest refined tin producer, Malaysia Smelting Corp. Bhd., lifted its COVID-19-related force majeure on Dec. 20, 2021, Andrew Radonjic, managing director of Australian tin developer Venture Minerals Ltd., told Commodity Insights.

Consensus forecasts project a decline in tin prices, according to Market Intelligence data, but Xia, Arden and Radonjic are all optimistic on tin's long-term prospects as demand continues to outpace supply.

"It will be like what happened during the early stages of the pandemic, when most commodities fell initially then bounced back," thanks to government stimulus, Radonjic said.

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