Price Indicator

Tin Focus:

1. China's industrial activity increases
2. Decrease in the Fed's interest rates

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Market Review

ICDX tin prices rose 3.02% compared to the previous week accompanied by a surge in demand in China's main markets amidst improving economic activity in the bamboo curtain country.

China shows an increase in tin consumption, marked by strong industrial activity. However, tin demand growth in China this year may lag behind the surge in 2023. China's economy improved in the first two months of this year supported by an increase in industrial output of 7% even though the real estate industry, which is the main driver of the economy, continues to decline.

The two-month increase in industrial production from companies above the specified size also represents an increase of 0.2 percentage points from December. The 5% jump in retail sales, a measure of consumption, also boosted growth in the world's second-largest economy, which is facing its slowest economic growth since 1990 and hampered by structural problems such as the property sector. The country's investment drive will also drive overall growth. Fixed asset investment, including infrastructure projects, increased 4.2% to 5.08 trillion yuan (US$706 billion) in January and February compared with the year-earlier period. Investment in real estate continues to be a drag because, minus property investment, the increase reached 8.9%.

On the other hand, the Myanmar National Democratic Alliance Army (MNDAA), which is a member of the Brotherhood Alliance, reopened two trade points on the Myanmar-China border, two months after reaching a ceasefire agreement with the Myanmar military. The move comes exactly two months after China-brokered talks halted fighting in northern Shan State on January 11 after months of heavy losses. This will have a positive impact on tin, considering that Myanmar is one of the world's largest tin producers, and China is the world's main consumer of tin.

Market View

The Fed's interest rate cut will strengthen tin's performance

One of the positive sentiments for tin going forward is speculation of the Fed's first interest rate cut for June with three to four cuts of 25 basis points. This will trigger a decline in the USD currency and make tin prices cheaper and trigger demand growth.

Market participants estimate that the Federal Reserve (The Fed) is likely to maintain its benchmark interest rate in the range of 5.25% to 5.5% at its March meeting. Jerome Powell is expected to remain hawkish as Fed policymakers want to see months of easing inflation before changing their monetary policy stance. Strong labor market conditions allow them to patiently watch inflationary pressures and cut interest rates only after there is convincing evidence that inflation will fall to the desired target of 2%. Tin suffers when high US interest rates to control inflation raise the yields on competing assets such as bonds and increase the value of the dollar, making the metal more expensive to buy with foreign currency and vice versa. Encouraged by expectations of a reduction in interest rates by the United States (US) Federal Reserve (The Fed) in June 2024, which is not far from the Fed's projections published in December, it improved tin's performance further.

Weekly Economics Data and Event

SOURCE: ICDX RESEARCH