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The tin market is nearing a three-year high on tightness and short-covering

The tin market is nearing a three-year high on tightness and short-covering

The price of tin jumped on Wednesday to its highest level in almost three years as traders scrambled for supplies and speculators juggled their positions after disruptions in two important tin-rich nations.

After an earthquake on Friday that struck Myanmar, the world's third-largest tin producer and producer of tin, a record high was reached on the London Metal Exchange, as well as the Shanghai Futures Exchange.

One trader stated that speculators have been buying back short positions or negative positions, particularly in Shanghai.

The most active SHFE May futures tin rose as much as 4.7% to 299 990 yuan per metric ton on Wednesday, while LME tin surged to $38,395 per ton after a 30% increase this year.

LME data show five large short positions for April futures. One of these represents 10-19% or the total open interest. <0#LME-FBR>

Tom Price, Panmure Liberum's head of commodities strategy, said: "There are many bullish drivers in this market with the confusion and unease around Myanmar."

The tin-mining areas of Myanmar have not been affected by the earthquake, which is the strongest in over a century to strike the Southeast Asian nation.

The epicentre of the quake is about 425km away. Mines in Wa State, a tin-rich state that produces 70% of Myanmar's Tin, are located approximately 265 miles (425km) from its epicenter.

In August 2023, the state of Wa suspended mining in the areas under its control to protect the resources. Before the earthquake, the state was considering resuming the activity.

After Alphamin Resources announced last month that it would cease operations at the third largest mine in the world, located in the Democratic Republic of Congo, due to rebels' advances towards the site.

Investors are worried about supply and have bid up the near-term LME Futures. The premium of the cash LME to the three-month futures has reached $264 per ton. This is the highest it's been in a year.

Alastair Mudro, senior metals strategist with broker Marex, said: "The term structure suggests a tightening market."

He added that "price behavior also attracts a systematic bid", referring to funds which trade using computer programs based on technical signals like momentum. (Reporting and editing by Ed Osmond, Pratima Deai, and Polina Demovitt)

(source: Reuters)