Tin rallies to near three-year peak on tightness, short-covering

By Eric Onstad

LONDON, April 2 (Reuters) - Tin prices jumped to their highest levels in nearly three years on Wednesday as traders scrambled to line up supplies and speculators juggled positions following disruptions in two major tin-rich countries.

Tin on both the London Metal Exchange (LME) and the Shanghai Futures Exchange (SHFE) hit its strongest levels since May 2022 after an earthquake struck Myanmar, the third largest tin producer, on Friday.

The rally in tin, mainly used for solder in electronics and semiconductors, has been fuelled by speculators buying back short or bearish positions, especially in Shanghai, one trader said.

Most active SHFE May tin futures SSNcv1 surged as much as 4.7% on Wednesday to 299,990 yuan a metric ton while LME tin CMSN3 jumped to $38,395 a ton, having rocketed 30% this year.

Traders say there is potential for more short covering, since LME data shows five large short positions in April futures, one of which equals 10-19% of total market open interest. 0#LME-FBR

"There are lots of bullish drivers here with the confusion and uncertainty around Myanmar," said Tom Price, head of commodities strategy at Panmure Liberum.

There has been little information about whether the quake, the strongest to hit the Southeast Asian country in more than a century, affected tin mining areas in Myanmar.

Mines in tin-rich Wa State, which produce 70% of Myanmar's tin, are about 425km (265 miles) away from the earthquake's epicentre.

Wa state suspended work at mines in areas it controls in August 2023 to protect resources and before the quake was considering the resumption of mining.

The tin market was already concerned about potential shortages after Alphamin Resources' AFM.V decision last month to halt operations at the world's third-largest mine in the Democratic Republic of Congo due to the advance of rebels towards the site.

Worried about supplies, investors have been bidding up near-term LME futures, sending the premium of cash LME over the three month futures to $264 a ton, the highest in about a year, and compared to a discount of $79 about two weeks ago.

"The term structure is bid, suggestive of market tightness," said Alastair Munro, senior base metals strategist at broker Marex.

"Price behaviour also attracting a systematic bid," he added, referring to funds that trade using computer programmes based on technical price signals such as momentum.