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Pollution crackdown on China tin producers could spur imports, lift prices

By Melanie Burton and Ruby Lian (Reuters) | 09 August 2016

MELBOURNE/SHANGHAI – China could ramp up imports of refined tin as a string of environmental inspections at smelters in the world’s top producer of the metal curbs local output.

Officials in eight provinces last month began inspecting metals producers including tin smelters, forcing some to shutter production while they look to comply with environmental standards, according to industry officials and analysts.

The checks come as a crackdown on pollution spreads beyond steel in the country’s mammoth metals processing and mining industries.

“It should have huge impact on the whole (tin) industry,” a trader at a Chinese tin smelter said of the environmental inspections. He declined to be identified due to the sensitivity of the issue.

“It’s … part of long-term supply side reform not just for the private sector or special smelters.”

Affected smelters account for some 45 percent of China’s annual tin production, or around 110,000 tonnes of capacity, according to tin industry group ITRI. Global refined tin output was around 340,600 tonnes last year.

ITRI analyst Cui Lin told Reuters that some producers had cut production from July 25 and would not be able to resume full output until Aug. 15 at the earliest.

She added that four smelters in Yunnan province could be shut for longer. Those smelters have a total production of some 42,000 tonnes of tin annualized, according to ITRI figures.

The cuts in production of tin, used in everything from electronics to packaging, will likely boost imports of refined metal from global markets, and have already helped push local and international prices to their highest in well over a year. Momentum is expected to pick up in the third quarter as appetite for tin grows after the slow summer holiday season.

Shanghai tin prices reached 13-month peaks in early July at 125,690 yuan ($18,860) a tonne, while LME tin on Friday hit its highest since early 2015 at $18,450 a tonne.

“If the cuts are extended, domestic supply tightness will be exacerbated in the short-term, leading to continued upwards pressure on domestic tin prices,” ITRI said in a report in July.

An official with Jinlong Mining in Jiangxi province said the company had brought forward a plan to relocate by a week from late July at the request of the environmental inspectors after it failed to meet standards.

The official added that other smelters in the region had temporarily suspended production last month due to environmental checks.

China produces most of its own tin by smelting, importing additional ore from Myanmar. Its overall refined tin imports slumped by 70 percent in June, and were down by 5 percent at 4,220 tonnes for the first six months of the year <MTL/CHINA2>.

($1 = 6.6621 Chinese yuan renminbi)

(Reporting by Melanie Burton in Melbourne and Ruby Lian in Shanghai; Editing by Joseph Radford)

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Corporate Governance

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