Yunnan Tin Co. Ltd., the world's largest tin producer, temporarily halted production amid a new COVID-19 outbreak in China and warned that downstream consumption could be hit hard.

Yunnan Tin said April 17 that it suspended production at its Yunnan Hualian Zinc and Indium Co. Ltd. unit due to COVID-19 prevention measures by the local government of Maguan county in China's southern province of Yunnan. Maguan reported 78 asymptomatic COVID-19 cases from April 15 to April 18, data from Yunnan's local government showed.

The production halt is expected to be short-term, Deputy General Manager Zhang Yang said April 18 on an investor call. The company is preparing to resume normal production soon after restrictions are lifted to minimize the negative impact on its operating performance, according to Zhang.

Yunnan Tin holds an 82.15% stake in the subsidiary, which mainly engages in mining, dressing and smelting of zinc, indium and tin. Yunnan Hualian Zinc and Indium generated revenue of 2.75 billion Chinese yuan in 2021, accounting for more than 50% of the total revenue of Yunnan Tin.

However, the biggest concern is that the outbreak has caused a logistic bottleneck in East China, and downstream consumption has been seriously affected, Deputy General Manager Wu Jianxun said.

East China is a major consumer of tinplate, which is mainly used for food packaging and chemical applications. The region accounts for 35% of total tin consumption in China, which in turn makes up nearly half of global demand, according to Wu.

Shanghai, the biggest city in East China, has been under strict lockdown since late March, and daily case numbers remain high at over 20,000 as of April 18.

Meanwhile, the company is facing challenges to sustain its ore reserves. In 2021, Yunnan Tin's tin ore output dropped nearly 18.9% to 35,000 tonnes, copper ore output fell 7.4% to 35,500 tonnes and zinc ore output slipped 2.3% to 99,000 tonnes. Ore grades have also been decreasing due to continuous mining at its Gejiu tin-copper mine and Wenshan Dulong zinc-tin mine.

"It's difficult to increase ore output for us," Wu said. China's electricity usage controls and the COVID-19 pandemic will continue to weigh on production in 2022, he added.

For the longer term, Wu expects tin prices to remain high as global demand outstrips supply. There is no major increase on the supply side, Wu said, but demand for tin used in solar panels, as well as electric vehicles batteries and semiconductor chips will keep rising in the future.

Benefiting from rising tin prices, Yunnan Tin expects its net profit to jump at least 234.4% to 1.1 billion yuan in the first quarter.

As of April 18, US$1 was equivalent to 6.37 Chinese yuan.

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