- Tin’s rebound has stalled and prices are now looking for support again. The early-February dip bottomed out at $18,630 per tonne; it has dipped as low as $18,915 so far today.
- While the early-February and the November sell-offs were both followed by sharp rebounds, the fact the latest rebound has stalled so soon suggests there is selling still around.
- The stochastics have turned bearish again so we would not expect another rebound yet.
- It would take a move back above $20,075 per tonne to negate the recent shake-out and above $20,700 to suggest the overall uptrend was back on track.
- The potential inverse H&S pattern created recently was not triggered so we will now have to see if former support holds.
The market may have been spooked by the abolition of the 10% tax on refined exports from China but, given the price differential, this may not change the markets trade flows much.
Still, the physical market reports good availability of both Indonesian and Chinese material. Alongside the inflow of metal into LME-approved warehouses in recent months, this has removed some of the former bullishness in the market.
With the nearby spreads back in contango, the incentive to deliver metal into LME-registered warehouses has waned. But with premiums low and good availability reported, LME stocks may not be needed for a while.
There are two large holders of LME warrants that collectively hold 80-98% of the warrants, while one entity still holds tom and cash positions equivalent to 30-39% of the warrants. Given this concentration of ownership, the spread could tighten up at short notice.
The 3-15 month spread has eased to a backwardation of $82 per tonne from $135b per tonne on February 10, which suggests a drop off in forward-selling interest.
The LME COTR data released on Tuesday February 21 showed money managers liquidated 108 longs and shorted 72 lots.
A price dip was justified given the pick-up in stocks and how long prices had been stuck sideways, which increased the chance of stale long liquidation. Overall, we expect tin’s fundamentals to remain tight and would look for prices to work higher again before too long.