The Tin Man’s Yellow Brick Road is Paved With Profits

The Tin Man’s Yellow Brick Road is Paved With Profits

Originally published on Dec. 9, 2021 by TraderStef at CrushTheStreet

The Tin Man has come a long way baby since making his debut in the Wizard of Oz. With the rocket shot in the price of tin since Jan. 2021, he can now afford a few more luxuries, another polishing, and have the heart implanted that he dreamed about.

Tin is not a metal I pay particular attention to and that oversight cost me a huge opportunity to capitalize on. CharlieBilello posted a list of YTD commodity price gains as of Nov. 24 that prompted an exploration. Tin is experiencing an exponential rise on its chart vs. coffee’s stairstep increase with pullbacks or lumber’s bubble that crashed back to earth and pivoted to a rational gain. I added tin to Charlie’s list.

Commodity Prices YTD as of Dec. 2021

What’s up with tin?

Tin Futures as of Dec. 9, 2021 Close

“Tin futures traded around $39,300 a tonne at the beginning of December, not far from a record high of $39,960 touched on November 24th, amid low inventories and supply disruptions, while higher demand helped to push the prices. The inventories in the LME-warehouses dropped to 1,365 tonnes, the lowest since 1989 while the ShFE stocks are near a five-year low. Also, measures to curb Covid’s spread in Myanmar have caused shipment disruptions, restricting refined tin output in China. Meantime, the third-biggest refined tin producer, Malaysia Smelting Group, declared force majeure on deliveries in June, while Chinese tin smelters reduced the output after curbs on power consumption. In addition, the ITA estimates a 7.2% rise in tin consumption in 2021, after a 1.6% decrease in 2020, boosted by the rapid transition to home working, which helped to sustain the tin prices.” – Trading Economics

Tin Prices Surge as Traders Battle Historic Supply Squeeze… “Tin traders are facing one of the biggest squeezes in the history of metals markets as Covid-19 drives a spike in demand and supply falters… That turmoil is capturing the attention of major investors who tend to overlook the critical but highly illiquid metal. Demand for tin, used in soldering, has surged amid booming sales of electronics in the work-from-home era. Coupled with disruptions to mine output and shipping routes, that’s left major European and U.S. consumers scrambling for metal as warehouses run dry… ‘Tin is relatively small compared to other markets, and people need to be aware of its potential to come and surprise you,’ Charles Swindon, managing director of specialist minor metals trading house RJH Trading Ltd., said by phone. ‘We’ve had a lot of enquiries from non-traditional sources looking to buy from us, but there’s just very little metal around.’” – Bloomberg, Feb. 2021

Those are relevant overviews, but one fundamental variable not mentioned is a looming supply glitch in the future and a buy the rumor/the sell the news scenario. Let’s first consider the top ten producers and top five reserves of tin by country with data from commodity.com. China leads the world in tin mining by producing more than 30% of annual global supply.

Mining and Reserves of Tin by Country for 2021

A couple years ago, Indonesia began imposing sovereignty over its natural resources by instituting a ban on nickel ore exports two years earlier than expected. The pandemic panic immediately followed and a plunge in global demand for numerous raw materials triggered a myriad of problems.

Indonesia is now planning a ban on tin, bausite, and copper ore exports by 2024. After the Indonesian president began making the announcement at various forums, the price of tin rose at a quickened pace after breaking above its previous high from the spring of 2019. Indonesia has been a major exporter of metal ores to mostly Asian countries and is in the process of shifting trade policies to attract investment in mainland resource processing and downstream industries, as well as improving its trade and account balances. The expected ban on nickel ore and other raw materials has the European Union up in arms and they filed a complaint with the World Trade Organization in Jan. 2021.

Everything you need to know about tin can be found at “A Guide To Tin Production, Use Cases, And Economic Value.” Due to the experience of an earlier than expected ban on nickel exports, investors and foreign industries are rushing to secure their supply of tin and that’s driving the exponential move in price.

Tin price surges past $40,000 after Jakarta jolt – “Indonesia may stop tin exports in 2024 as part of its ambitions to attract investment into downstream processing and manufacturing in the Asian nation, President Joko Widodo said on Wednesday. The news sent the metal, extensively used in the electronics sector, to a fresh record high with three-month contracts topping $40,000 a tonne for the first time ever.  Prompt delivery of tin has traded at unprecedented premiums of more than $1,000 a tonne this year, indicating severe supply shortages in the cash market.” – Business Insider, Nov. 2021

An equity focused on tin for the retail investor or trader is iPath Series B Bloomberg Tin Subindex Total Return ETN.

$JJT weekly chart as of Dec. 9, 2021 close…

$JJT Tin Weekly Chart Dec. 9, 2021 Close - Technical Analysis by TraderStef

The exponential surge is evident with the accelerated price action in an Up Channel that followed a breakout from the 2019 topside lateral resistance. Higher Volume has improved liquidity conditions this year but is still running thin on an intraday basis. The 50 Exponential Moving Average (EMA) is rising steadily with price, the DMI-ADX has not rolled over into a negative trend but is somewhat indecisive, and the StochRSI is showing signs of potential upside. My suggestion is wait for a throwback that tests the Up Channel’s lower trendline and see how the price action and indicators react before risking any capital. The next level of price support to trade a pivot is wherever the 50 EMA is resting. Caution is advised when trading this stock because the price surge is long in the tooth and intraday liquidity can be thin.

America – Tin Man in Wizard of Oz

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