The tin market is experiencing a surge in prices, reaching all-time highs on both the London and Shanghai markets. This sudden spike has raised concerns about a potential bubble, with the China Nonferrous Metals Industry Association (CNMIA) warning against 'blindly following the trend'. Chinese investors, however, are not deterred, driving the price even higher. The trading volume on the Shanghai Futures Exchange's tin contract exceeded a million metric tons, more than twice the world's annual physical usage. This situation is particularly concerning due to the mismatch between the physical market and investment interest, which could lead to increased volatility. The London Metal Exchange (LME) tin contract has also been bubbling, with Chinese investors fueling the rally. The driving narrative behind this surge is a perceived supply shortfall, but the tin supply picture has actually been improving over recent months. The threat to Congo's Bisie mine has receded, and the giant Man Maw mine in Myanmar is showing signs of renewed productivity. Additionally, Indonesia's official-sector production quotas are expected to increase. The current tin price bubble has injected more volatility into the market, posing real-world problems for the physical supply chain. The question arises: when does liquidity risk override price risk? As fund money pours into the industrial metals complex, tin's drama may serve as a warning for other in-demand metals. The CNMIA highlights the dangers of the current exuberance, emphasizing the deviation from industry fundamentals and the significant magnifying of market risks.
