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Myanmar's tin mining suspension affects global supply in the medium to long term
2023/6/14
How big is the impact of the "mining ban"?
On April 15, the Wa State Government of Myanmar issued the "Notice on Suspension of All Mineral Resources Mining", stating that all mining and excavation of mineral resources would be suspended until the mining conditions were ripe; companies and enterprises whose contracts had not yet expired would be given three months to make good aftercare; after August 1, all exploration, mining and processing operations would be stopped; and enterprises or individuals who still violated the regulations after August 1 would be severely punished by the judiciary. On May 20, the Wa State Government issued the "Notice on the Implementation of the Moratorium on All Mineral Resources Mining", which indicated that all mining areas in Wa State would be prepared to stop production on August 1, on the grounds of protecting the remaining mineral resources after more than 10 years of "destructive and wasteful mining". The reason is to protect the remaining resources after more than 10 years of "destructive and wasteful mining".
After April 17, the average spot price of tin rose for four consecutive days, rising to 209,300 yuan/ton. April 17, Shanghai tin futures main 2305 contract opened high, up 12% around 14:30, touching the stop, at 218,700 yuan/ton, a record high since February 23 LME's March tin futures price rose 10% on April 17 to $27,500/ton from $25,050/ton on April 14.
The International Tin Association warned that Myanmar's move could threaten nearly 10 percent of global tin concentrate supplies and that tin metal prices could rebound after global tin ore supplies fell in August.
Myanmar is the world's third largest tin producer, and according to the U.S. Geological Survey, China leads the world with 1.1 million tons of tin ore reserves as of the end of 2021, accounting for 22 percent of the global total; Indonesia and Myanmar have the second and third largest reserves, 800,000 tons and 700,000 tons, respectively, with 16 percent and 14 percent of the reserves.
Myanmar is the first source of tin ore import in China, and in 2022, about 32% of China's total tin ore supply came from Myanmar. in April 2023, the total amount of tin ore exported from Wa State to China accounted for 89% of Myanmar's total tin ore exported to China. Wa State is the largest tin ore producing area in Myanmar, located at the border between China's Yunnan Province and Myanmar. There are abundant mineral resources of gold, silver, copper, lead, zinc and tin in Wa State, among which tin ore is rich in reserves and is one of its major export commodities. By the end of 2022, tin production in the Wa region accounted for more than 70% of Myanmar's total tin production.
According to the International Tin Association, only a small amount of tin has also been mined in areas under the Myanmar government's jurisdiction, including the Mawchi mine in Kayah State and the Heinda mine in the Tanintharyi region of southern Myanmar. If the mining in Wa State is completely stopped on the subsequent August 1, it will lead to a large gap in Myanmar's domestic tin supply and expose the country to serious tin supply concerns . According to statistics, Myanmar's tin ore exports to China are estimated at 47,400 tons in 2022, an increase of about 10,000 tons from 2021. Our tin ore imports from Congo, Australia, Nigeria, Laos, Russia and Malaysia are relatively small and it remains uncertain whether supplies from these alternative sources will increase rapidly or reach sufficient scale to offset the losses from Myanmar.
Pressure on China's smelters remains high
In April, China's tin ore imports were 18,671 tons, down 14.85% YoY and up 18.09% YoY; from January to April, China's cumulative tin ore imports were 74,171 tons, down 29.05% YoY. Tin concentrate imports fell significantly, mainly due to the entry into 2023, tin spot prices fell significantly, overlaid with the impact of declining tin ore grades, tin mining profits were damaged, triggering miners to cover the mood of goods.
In May, domestic refined tin production was 15,700 tons, an increase of 4.72% YoY and a decrease of 4.1% YoY; from January to May, the cumulative domestic refined tin production decreased by 2.6% YoY. The production is expected to be 13,700 tons in June, an increase of 32.69% year-on-year. At present, the combined start-up rate of refined tin smelters in Yunnan and Jiangxi is 54.17%, of which the start-up rate of smelters in Yunnan is 57.46%, with most enterprises still holding steady production; the start-up rate of smelters in Jiangxi is 48.56%, with a slight decrease in production capacity. Most smelters today said that tin ore and scrap supply is relatively tight, the recent reduction in raw material purchases, taking into account the tin ingot pyro smelting cycle in about two weeks, tin ingot electrolytic smelting cycle in the vicinity of 1 month, the last two weeks tin smelters raw material procurement shortage state will gradually feedback to the subsequent output of tin ingots. Overall, it is still difficult to increase the output of tin smelters significantly in the near future.
Future tin ore production is still pessimistic expectations
From a demand perspective, the emerging market demand for tin is very strong and on an upward trend. Data show that China will become the world's largest tin consumer in 2023, expected to reach 303,000 tons. In addition, tin consumption is expected to grow in a number of other regions, including the Middle East, South America and Europe, where consumption continues to grow, with consumption growth to come primarily from demand for tin as it grows with renewable energy power plants, innovative technologies and the maintenance and renewal of electronics.
Over the past few years, the Indonesian government has been lengthening its list of "banned exports" of energy minerals, from nickel, bauxite and coal, to palm oil, tin and copper, and is now considering a June ban on all exports of unprocessed metal ores, including tin. Indonesia is a major exporter of mineral resources in the global energy market, being the world's sixth-largest producer of bauxite, with the world's fifth-largest bauxite reserves, and a major global exporter of tin, exporting $2.44 billion worth of refined tin last year, while consuming only 5 percent of its own tin metal production. Given this trend, Myanmar may be incentivized to implement a similar policy, as it has virtually no downstream beneficiation of tin.
Other major global tin mining nations currently include Peru, Congo, Bolivia, Brazil and Australia, and if other producers do not increase production to make up for the supply gap in Myanmar, it will raise global supply concerns. However, most of these countries are emerging market countries with high geopolitical risk, especially Congo, Bolivia and Brazil, where tin production is expected to be highly uncertain in 2023. In addition, due to political uncertainty in Myanmar and the Wa region's control over tin resources, the agency expects Myanmar's economy to grow slowly, averaging only 1.8% year-on-year by 2032. According to Statista, Myanmar does not rank among the top nine refined tin exporters in the Asia-Pacific region in 2021, despite producing a significant percentage of tin ore. By comparison, Indonesia, another major tin producer, exported 74,900 tons of refined tin in 2021. Given the size of Myanmar's tin mining sector, the government is more likely to promote growth in the sector through local beneficiation and refined tin investments to consolidate its share of the Asia-Pacific refined tin market.
In the longer term, Myanmar is expected to remain an important global tin producer, although political uncertainty will increase downside risks to its tin production. The Mining Risk/Reward Index from BMI, a Fitch-owned research firm, ranks Myanmar last among 13 markets in the Asia-Pacific region. This reflects the market's pessimistic expectations about the country's poor and unstable political outlook and future tin supply vulnerability.
Overall, downside risks to tin mining in Myanmar are expected to continue to increase over the next 10 years. Nonetheless, given Myanmar's historical mining capacity and the importance of the Wa State as its source of revenue, we believe that Myanmar may use these resources to maintain some level of tin production, which may also come from outside the Wa State.
On April 15, the Wa State Government of Myanmar issued the "Notice on Suspension of All Mineral Resources Mining", stating that all mining and excavation of mineral resources would be suspended until the mining conditions were ripe; companies and enterprises whose contracts had not yet expired would be given three months to make good aftercare; after August 1, all exploration, mining and processing operations would be stopped; and enterprises or individuals who still violated the regulations after August 1 would be severely punished by the judiciary. On May 20, the Wa State Government issued the "Notice on the Implementation of the Moratorium on All Mineral Resources Mining", which indicated that all mining areas in Wa State would be prepared to stop production on August 1, on the grounds of protecting the remaining mineral resources after more than 10 years of "destructive and wasteful mining". The reason is to protect the remaining resources after more than 10 years of "destructive and wasteful mining".
After April 17, the average spot price of tin rose for four consecutive days, rising to 209,300 yuan/ton. April 17, Shanghai tin futures main 2305 contract opened high, up 12% around 14:30, touching the stop, at 218,700 yuan/ton, a record high since February 23 LME's March tin futures price rose 10% on April 17 to $27,500/ton from $25,050/ton on April 14.
The International Tin Association warned that Myanmar's move could threaten nearly 10 percent of global tin concentrate supplies and that tin metal prices could rebound after global tin ore supplies fell in August.
Myanmar is the world's third largest tin producer, and according to the U.S. Geological Survey, China leads the world with 1.1 million tons of tin ore reserves as of the end of 2021, accounting for 22 percent of the global total; Indonesia and Myanmar have the second and third largest reserves, 800,000 tons and 700,000 tons, respectively, with 16 percent and 14 percent of the reserves.
Myanmar is the first source of tin ore import in China, and in 2022, about 32% of China's total tin ore supply came from Myanmar. in April 2023, the total amount of tin ore exported from Wa State to China accounted for 89% of Myanmar's total tin ore exported to China. Wa State is the largest tin ore producing area in Myanmar, located at the border between China's Yunnan Province and Myanmar. There are abundant mineral resources of gold, silver, copper, lead, zinc and tin in Wa State, among which tin ore is rich in reserves and is one of its major export commodities. By the end of 2022, tin production in the Wa region accounted for more than 70% of Myanmar's total tin production.
According to the International Tin Association, only a small amount of tin has also been mined in areas under the Myanmar government's jurisdiction, including the Mawchi mine in Kayah State and the Heinda mine in the Tanintharyi region of southern Myanmar. If the mining in Wa State is completely stopped on the subsequent August 1, it will lead to a large gap in Myanmar's domestic tin supply and expose the country to serious tin supply concerns . According to statistics, Myanmar's tin ore exports to China are estimated at 47,400 tons in 2022, an increase of about 10,000 tons from 2021. Our tin ore imports from Congo, Australia, Nigeria, Laos, Russia and Malaysia are relatively small and it remains uncertain whether supplies from these alternative sources will increase rapidly or reach sufficient scale to offset the losses from Myanmar.
Pressure on China's smelters remains high
In April, China's tin ore imports were 18,671 tons, down 14.85% YoY and up 18.09% YoY; from January to April, China's cumulative tin ore imports were 74,171 tons, down 29.05% YoY. Tin concentrate imports fell significantly, mainly due to the entry into 2023, tin spot prices fell significantly, overlaid with the impact of declining tin ore grades, tin mining profits were damaged, triggering miners to cover the mood of goods.
In May, domestic refined tin production was 15,700 tons, an increase of 4.72% YoY and a decrease of 4.1% YoY; from January to May, the cumulative domestic refined tin production decreased by 2.6% YoY. The production is expected to be 13,700 tons in June, an increase of 32.69% year-on-year. At present, the combined start-up rate of refined tin smelters in Yunnan and Jiangxi is 54.17%, of which the start-up rate of smelters in Yunnan is 57.46%, with most enterprises still holding steady production; the start-up rate of smelters in Jiangxi is 48.56%, with a slight decrease in production capacity. Most smelters today said that tin ore and scrap supply is relatively tight, the recent reduction in raw material purchases, taking into account the tin ingot pyro smelting cycle in about two weeks, tin ingot electrolytic smelting cycle in the vicinity of 1 month, the last two weeks tin smelters raw material procurement shortage state will gradually feedback to the subsequent output of tin ingots. Overall, it is still difficult to increase the output of tin smelters significantly in the near future.
Future tin ore production is still pessimistic expectations
From a demand perspective, the emerging market demand for tin is very strong and on an upward trend. Data show that China will become the world's largest tin consumer in 2023, expected to reach 303,000 tons. In addition, tin consumption is expected to grow in a number of other regions, including the Middle East, South America and Europe, where consumption continues to grow, with consumption growth to come primarily from demand for tin as it grows with renewable energy power plants, innovative technologies and the maintenance and renewal of electronics.
Over the past few years, the Indonesian government has been lengthening its list of "banned exports" of energy minerals, from nickel, bauxite and coal, to palm oil, tin and copper, and is now considering a June ban on all exports of unprocessed metal ores, including tin. Indonesia is a major exporter of mineral resources in the global energy market, being the world's sixth-largest producer of bauxite, with the world's fifth-largest bauxite reserves, and a major global exporter of tin, exporting $2.44 billion worth of refined tin last year, while consuming only 5 percent of its own tin metal production. Given this trend, Myanmar may be incentivized to implement a similar policy, as it has virtually no downstream beneficiation of tin.
Other major global tin mining nations currently include Peru, Congo, Bolivia, Brazil and Australia, and if other producers do not increase production to make up for the supply gap in Myanmar, it will raise global supply concerns. However, most of these countries are emerging market countries with high geopolitical risk, especially Congo, Bolivia and Brazil, where tin production is expected to be highly uncertain in 2023. In addition, due to political uncertainty in Myanmar and the Wa region's control over tin resources, the agency expects Myanmar's economy to grow slowly, averaging only 1.8% year-on-year by 2032. According to Statista, Myanmar does not rank among the top nine refined tin exporters in the Asia-Pacific region in 2021, despite producing a significant percentage of tin ore. By comparison, Indonesia, another major tin producer, exported 74,900 tons of refined tin in 2021. Given the size of Myanmar's tin mining sector, the government is more likely to promote growth in the sector through local beneficiation and refined tin investments to consolidate its share of the Asia-Pacific refined tin market.
In the longer term, Myanmar is expected to remain an important global tin producer, although political uncertainty will increase downside risks to its tin production. The Mining Risk/Reward Index from BMI, a Fitch-owned research firm, ranks Myanmar last among 13 markets in the Asia-Pacific region. This reflects the market's pessimistic expectations about the country's poor and unstable political outlook and future tin supply vulnerability.
Overall, downside risks to tin mining in Myanmar are expected to continue to increase over the next 10 years. Nonetheless, given Myanmar's historical mining capacity and the importance of the Wa State as its source of revenue, we believe that Myanmar may use these resources to maintain some level of tin production, which may also come from outside the Wa State.
In summary, if China's subsequent tin ore import demand fails to cover the supply gap in Myanmar, in line with this trend, the second half of 2023, with the suspension of tin mining in Wa State and for a longer period of time, will lead to a contraction in the supply side of tin ore in the medium to long term, superimposed on the semiconductor industry in the consumer demand side of the bottoming out of the drive, Shanghai tin futures prices are expected to break upwards to more than 250,000 yuan per ton.
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