Tin Price Rally Cools Down, When To Buy?

| About: iPath Dow (JJT)
This article is now exclusive for PRO subscribers.

Original Post

By Raul de Frutos

Tin prices have gone pretty ballistic this year. Prices went from $13,000 per metric ton in January to $22,000/mt this month, up 70%.

We called tin's bull market back in March and as we pointed out in our monthly outlook, our subscribers capitalized on two great opportunities to buy long-term forward this year. One in March and one in July:

How MetalMiner subscribers purchased tin this year. MetalMiner analysis of @stockcharts.com data.

Apart from the bullish sentiment across the metals sector, the specific bullish case for tin started after an Indonesian supply shortfall in the last two years after that country passed a raw ore ban. The country's exports declined 16% during the first eight months of this year after exports decreased nearly 30% in 2015.

What's impressive about tin's rally is that prices continued to climb despite rising output from Myanmar. In the first nine months of the year, China imported 345,884 metric tons of ore and concentrates from Myanmar, up 94% from the same period last year.

Despite the flood of ore from Myanmar, what's keeping this bull alive are expectations of tapering supply from Myanmar, the slow ramp-up of mines elsewhere and no new surprise sources of ore. The International Tin Research Institute suggested that the country has already picked all the low-hanging fruits and the combination of rising production costs and the need for new investment to develop underground mines will result in a sharp fall in output.

When To Buy Tin Next

After this spectacular rally, it was normal to expect some price pressure. Prices might need some time to digest this year's gains. However, once prices take that needed pause, any evidence of lower supply from Myanmar could trigger another price rally. As prices pull back, tin buyers might find a good opportunity to buy some volume near support levels.