Tin

Tin has been a very unglamorous metal for a long time. With the price in the doldrums for decades only the most economic producers survived and this tended to be the miners with deposits that could be exploited by dredging or with the comparative advantage of really cheap labour. The resurgence in the industry in recent times has been only on the price side, for production remains subdued because of long term underinvestment and a generalized disinterest amongst mining groups in the metal.

So the global landscape is one of declining production in Indonesia and Malaysia (and reputedly Peru), export complications in Indonesia as they grapple with maintaining value-added on this declining industry, China remains off-limits and in some way autarkic, Bolivia is similarly off-limits (at least in investors' perceptions) while a few companies are trying to revive production in Australia and investigate the possibilities in places as untried as Morocco. Interestingly Africa, most notably Rwanda, is having a tin renaissance and Brazil is on the rise (impelled forward by the Peruvian tin major, Minsur).

Tin is a chemical element with symbol Sn (from the Latin word stannum) and atomic number 50. Tin shows chemical similarity to neighboring elements in the periodic table, germanium and lead. Tin is the 49th most abundant element in the Earth's crust, representing 2 ppm, compared with 75 ppm for zinc, 50 ppm for copper, and 14 ppm for lead. Tin is obtained chiefly from the mineral cassiterite, where it occurs as tin dioxide, SnO₂.

This silvery, malleable metal is not easily oxidized in air and is used to coat other metals to prevent corrosion. The first alloy, (since 3000 BC) was bronze, an alloy of tin and copper. After 600 BC pure metallic tin was produced. Pewter, which is an alloy of 85-90% tin with the remainder commonly consisting of copper, antimony and lead, was used for flatware from the Bronze Age until the 20th century.

Tin does not occur as the native element but must be extracted from various ores. Cassiterite (SnO2) is the only commercially important source of tin, although small quantities of tin are recovered from complex sulfides such as stannite, cylindrite, franckeite, canfieldite, and teallite. Minerals with tin are almost always associated with granite rock, usually at a level of 1% tin oxide content.

In modern times tin is used mainly in alloys. While this sounds like a limited usage, it is the alloys themselves that have a multitude of usages. Broadly speaking these days, apart from alloys, tin's main uses are in tin plating, solder and in the manufacturing of chemical compounds which are used in a variety of ways, from fire-proofing cloth, to making PVC stabilisers, pesticides and wood preservatives.

As the pie chart shows, tin's use in solders is the dominant application, most notably tin/lead soft solders, typically containing 60% or more of tin. Legislation was introduced in 2006 banning the use of lead in electronics, tin then became the main metal in solder. The solder industry now equates for around 55% of tin consumption.

The second most important application is corrosion-resistant tin plating of steel. Because of its low toxicity, tin-plated metal is also used for food packaging, giving the name to tin cans, which are made mostly of steel. Tin's use in tin plating for packaging competes directly with aluminium, but the packaging market is big enough for both of them to operate in and each packaging material has its own unique advantages. Tin-coated steel cans are more robust than aluminium cans, which has some advantages for tinned foods.

Amongst the myriad of other applications are:

• Important alloys include soft solder, type metal (though fading), fusible metal, pewter, bronze, bell metal, Babbitt metal, White metal, die casting alloy, and phosphor bronze
• Tin chloride (SnCl₂.H₂O) is used as a reducing agent and as a mordant in calico printing
• Tin salts sprayed onto glass are used to produce electrically conductive coatings. These have been used for panel lighting and for frost-free wind-shields
• Window glass made by the Pilkington Process floats molten glass on molten tin (float glass) to produce a flat surface (though the tin is largely reusable in this process with only incremental increase in glass demand increasing tin usage in this industry)
• A crystalline tin-niobium alloy is superconductive at very low temperatures. Such magnets, made of tin-niobium wire, weigh just a few pounds and produce magnetic fields that are comparable to that of a 100 ton electromagnet
• Trialkyl and triaryl tin compounds are biocides. However there are concerns over their environmental effects. Tributyltin is the active ingredient in a type of anti-fouling paint used on ships

The uses of tin don't resonate in the same way as Rare Earths did in 2010 with edgy new technologies and sexy applications but Tin has the advantage that it is not exactly troglodytic either with extensive usage in electronics particularly micro-electronics. Beyond that Tin is one of the largest volume specialty metals without the danger of being made redundant by technological change. Rare Earths are a mere sideshow in comparison.

Cassiterite (SnO₂), the tin oxide form of tin, is the most mined tin-bearing mineralization. Other forms of tin ores are less abundant sulfides such as stannite that require a more involved smelting process. Cassiterite often accumulates in alluvial channels as placer deposits due to the fact that it is harder, heavier, and more chemically resistant than the granite in which it typically forms. These deposits can be easily seen in river banks as cassiterite is usually black, purple or otherwise dark in color, a feature exploited by early Bronze Age prospectors. It is likely that the earliest deposits were alluvial in nature, and perhaps exploited by the same methods used for panning gold in placer deposits.

Because of the higher specific gravity of tin dioxide, about 80% of mined tin is from secondary deposits found downstream from the primary lodes. Tin is often recovered from granules washed downstream in the past and deposited in valleys or under sea. Therefore the most used tin mining practice in recent decades has been dredging, which is particularly applicable for the relatively high-grade alluvial cassiterite deposits found in Malaysia and Indonesia. Dredges usually operate by creating firstly a pool then the dredge is placed in the pool and moves forward expanding the pool in a particular direction with the mined area being backfilled with the waste material after separation.

At its peak between 1954 and 1964 the Malaysian tin mining industry had 75 dredges operating, and supplied 45% of the world's tin demand.

Large scale dredging lost dominance as the main alluvial method in the early 1980s. In South-East Asia particularly, smaller deposits, or those unsuitable for dredging (e.g. because the bedrock is very rough) are worked by gravel pumping.

Meanwhile the decreasing supply of easy pickings via dredge and suction pump mining has tipped the balance in favour of hard rock mining. The chart below from International Tin Research Institute shows the current state of play.

Vein and disseminated tin deposits are mined by the same methods used in hard-rock mining of other non-ferrous ores such as zinc. The ore is broken by drilling and blasting, transported to a concentrator where it is crushed and ground and then concentrated primarily by gravity methods. The concentrate is usually of a lower grade (typically 40-60% Sn) than placer concentrate because of the fine grain size of the cassiterite (tin oxide) and the difficulty of removing all the associated sulphide and other heavy minerals. Flotation is not as efficient for tin ores as it is for sulphide ores.

Hard-rock underground mining is predominant in China, South America and Australia, although there are some open pit operations in all these places.

The international Tin Research Institute (ITRI) is a trade body that produces the best data on the industry and includes all the major players as members. In some ways it is the heir to tradition of the much-maligned International Tin Council upon which we shall elaborate anon.

The ITRI's estimation of the usage of different mining techniques is shown in the pie chart to the left.

It should also be noted that secondary, or scrap, tin is also an important source of the metal. The recovery of tin through secondary production, or recycling of scrap tin, is increasing rapidly. Whereas the United States has neither mined since 1993 nor smelted tin since 1989, it was the largest secondary producer, recycling nearly 14,000 tonnes in 2006.

Estimates of tin production have historically varied with the dynamics of economic feasibility and the development of mining technologies, but it is estimated that, at current consumption rates and technologies, the Earth will run out of tin that can be mined in 40 years. Some more apocalyptic commentators have suggested tin could run out within 20 years based on a conservative extrapolation of 2% growth per year.

While China is the largest tin producer by a long way, it does not have the dominant position that it holds in many other specialty metals. About 253,000 tonnes of tin were mined in 2011, mostly in China (110,000 t), Indonesia (51,000 t), Peru (34,600 t), Bolivia (20,700 t) and Brazil (12,000 t).

The three largest producers are:

• Timah PT - Indonesia (30,000t)
• China Yunnan Tin - China (27,000t)
• Minsur - Peru (25,000t)

China is the country with the largest reserves by far but as always with Chinese numbers one must be vigilant for misinformation in estimates either to the upside or downside. 

The table at the right shows the economically recoverable tin reserves at various points over the last few decades. It is interesting to note the ups and downs in the numbers over time. This is due to the fact that certain reserves are not recoverable at times of very low prices (such as 1985) which therefore shrinks the size of recoverable reserves.

The current high prices should expand this number again but like so many other metals, prolonged under-investment and generalized grade decay due to high-grading and plain old exploitation lay the ground for a scenario that at any price the amount of tin in reserves cannot be expanded.

New deposits are reported from time to time in non-traditional locations such as, in recent times, in southern Mongolia, and in 2009, new deposits of tin were discovered in Colombia.

The major trading venue for tin is the London Metal Exchange (LME) while other tin contract markets are Kuala Lumpur Tin Market (KLTM) and Indonesia Tin Exchange (INATIN).

Tin has long been subject to a form of price stabilization, that almost equated to a cartel. This situation was held in place by complex "agreements" between producer countries and consumer countries dating back to 1921. The earlier agreements tended to be somewhat informal and sporadic; they led to the "First International Tin Agreement" in 1956, the first of a continuously numbered series that essentially collapsed in 1985. Through this series of agreements, the International Tin Council (ITC) had a considerable effect on tin prices. The ITC supported the price of tin during periods of low prices by buying tin for its buffer stockpile and was able to restrain the price during periods of high prices by selling tin from the stockpile.

This was a classic cartel-type action, designed to assure a sufficient flow of tin to consumer countries and a decent profit for producer countries. However, the buffer stockpile was not sufficiently large, and during most of those 29 years tin prices rose gradually. However, from 1973 through 1980, when rampant inflation plagued many world economies, the price soared, as can be noted from the price graph on the following page.

The most dramatic price surge had no correlation with production, though notably the subsequent price plunge did result in a substantial retreat in production volumes.

During the late 1970s and early 1980s, the U.S. Government tin stockpile was in an aggressive selling mode, partly to take advantage of the historically high tin prices, but also due to the now infamous decision to shrink strategic stockpiles that has let the US in the vulnerable position that it's in today.

The sharp recession of 1981-82 proved to be quite harsh on the tin industry. Tin consumption declined dramatically. The ITC was able to avoid truly steep declines through accelerated buying for its buffer stockpile; this activity required the ITC to borrow extensively from banks and metal trading firms to augment its resources. The ITC continued to borrow until late 1985, when it reached its credit limit. Immediately, a major "tin crisis" followed - tin was delisted from trading on the London Metal Exchange for about three years, the ITC dissolved soon afterward, and the price of tin, now in a free-market environment, plummeted sharply to $4 per pound and remained around this level through 1990s. It rebounded again by 2010 due to an increase in consumption following the 2008-09 world economic crisis, restocking and continued growth in consumption in the world's developing economies.

Many of the truisms being bandied about tin are actually true. And what are these truisms?

• Easy-to-access alluvial tin is in decline
• Indonesia is restricting access to its tin concentrate
• Western countries, excepting Australia, scarcely figure in tin production
• Much of the production, outside of the major producers, is artisanal
• Those new projects that have realistic prospects of being built tend to the smaller side
• Grades are in decline and high prices are required to justify building mines with progressively lower grades
• Finance for new builds is very tough in capital markets, this leaves offtake funding as the main avenue which tends to have production disappear into the maw of a trading house
• Greenfields exploration is nearly non-existent with most focus on past-producing areas

The sum of these truisms is best seen in the chart below which shows a particularly dire supply outlook over the next half decade. 

This chart however conceals some disturbing facts. It only projects as far as 2016, which is not that far away. For example, it shows Peruvian tin output rising but Minsur, which operates San Rafael in Peru (the largest tin mine in the world supplying ~10% of the global market) has stated that it expects the mine to be exhausted by 2017.

According to the USGS, in 2010, global production of refined tin was about 321,000 t. They projected it to increase to 343,000 tpa by 2013, 362,000 tpa by 2015, and 385,000 tpa by 2017. They projected that, in China, annual production capacity was expected to increase to 180,000 tpa of refined metal by 2017.

In Indonesia, the Yunnan Tin Co. Ltd. planned to develop a tin smelter, which would increase the country's production capacity to 55,000 tpa by 2017. In Thailand, production capacity is expected to increase to 30,000 tpa by 2017. These predictions were made before Indonesia threw its spanner in the works. An X factor is the amount of the Chinese refined product that is in fact not sourced from Chinese mines but elsewhere, notably Indonesia.

An important thing to note also is that the preceding chart is referring to week's supplies of tin whereas the USGS is referring to gross production. Prices tend to move when supply is tight more than anything else. So the week's supply numbers are the ones that will light a fire under prices and produce most concern.

The ITRI forecasts that 70,000t p.a. increase in new supply will be required by 2015 and estimates the capital cost per installed tonne of tin production as $30,000 implying investment of $2.1 billion by 2015.