Tin: The Overlooked Tech Metal to Buy for the EV and AI Boom

• Tin demand contracted nearly 4% in 2023, with weakness across major sectors like soldering, chemicals, and alloys. Demand is expected to see a modest 3% recovery in 2024.
• Over 50% of tin is used in soldering for circuit boards and electronics. Lockdown-driven purchases pulled forward demand, leading to a "long headwind of usage" in the soldering sector.
• The suspension of Myanmar's Man Maw mine, which accounts for 7% of global supply, is a major supply risk. The mine has been shut since August 2022 for an audit by the United Wa State Army with no timeline for resuming production.
• Indonesia, the world's largest exporter of refined tin, has a policy to restrict exports of unprocessed metals. While successfully implemented in nickel, it will be more challenging for tin given the need to attract complex, downstream soldering and semiconductor customers.
• Tin faces long-term structural supply challenges with limited new projects in development. However, demand should be underpinned by the growth of electronics, electric vehicles, AI and data centers, making it an "overlooked critical metal."

The Case for Investing in Tin

Tin is an often overlooked but increasingly critical metal that is poised to benefit from a number of powerful demand drivers in the coming years. As a key component in soldering for circuit boards and semiconductors, tin is a necessary input for the electronics, electric vehicles, renewable energy, AI and data center industries - some of the fastest growing parts of the global economy.

On the supply side, tin faces significant challenges and risks that threaten to create persistent market deficits and support elevated prices. The recent suspension of the world's largest tin mine in Myanmar has cut off 7% of global supply and is a major wildcard overhanging the market. At the same time, Indonesia, the biggest exporter of refined tin, is pursuing an aggressive policy to restrict shipments of unprocessed metals and force downstream investment, creating further uncertainty for the tin supply chain.

Tin's Critical Role in Electronics and EVs

Over 50% of global tin consumption is now used in soldering for circuit boards and electronic components, making it a direct play on the exponential growth of electric vehicles, 5G smartphones, IoT devices, and data centers. As Andy Home, Senior Metals Columnist at Reuters, explains:

"It has been described, I think accurately, as the metal that holds - that glues - the internet together. No tin soldering, no circuit boards. No circuit boards, no electronic goods. So it is very beholden to cycles in the electronic goods sector."

Tin demand should be buoyed by the rapid adoption of electric vehicles, which require substantially more semiconductor content and circuit board soldering than traditional combustion engine cars. EV sales more than doubled to 6.6 million vehicles in 2021 and are forecast to reach 30-40 million units annually by 2030.

The 5G rollout and growth of internet-connected devices from smartwatches to security systems is also a boon for tin soldering demand. 5G phones have 30-40% more semiconductor content than 4G devices, while the global IoT market is expected to expand at an 11% CAGR to reach $1.3 trillion by 2026.

Data centers and cloud computing infrastructure are another fast-growing source of tin demand, with the global data center market projected to grow at a 13.7% CAGR from 2022-2030. The buildup of AI computing capacity and machine learning training centers will further bolster tin consumption in the coming years.

Myanmar Shutdown and Supply Fears

While tin has strong demand fundamentals, the supply side is riddled with risks that could lead to severe shortages in the coming years. The most immediate concern is the ongoing suspension of the Man Maw mine in Myanmar, which accounts for 7% of global tin supply.

The Myanmar military government ordered all tin mines in the Wa State to be shut in August 2022 for a supposed "audit" and there is no timeline for when operations will be allowed to resume. The audit is being directed by the United Wa State Army, one of Myanmar's largest ethnic militias that controls the Man Maw mine through its semi-autonomous status.

Since the shutdown, tin concentrate imports from Myanmar to China have collapsed over 90%, a clear sign mining activity has not resumed in any meaningful way. China's overall tin raw material imports are down over 30% year-to-date, an "unsustainable" situation according to Home.

"Our best gauge of what's going on, since we don't get any production figures, is to look at how much raw material China is importing from its neighbor. And that has just been declining, and declining, and declining," states Home. "That tells me that whatever is going on there, no one's actually mining again. Because as soon as they mine, you can guarantee that the material will start flying over the border again."

The Myanmar shutdowns are a "big known unknown" for the tin market and the longer the disruptions drag on, the more likely it is that prices will react to the supply shortfall. Chinese smelters are already experiencing "genuine distress" and taking extended maintenance outages to try to eke out their dwindling raw material inventories.

Indonesia Export Ban Looms

The second major supply risk facing the tin market is Indonesia's drive to ban exports of unprocessed metals and move down the value chain. As the world's largest exporter of refined tin, accounting for one-third of global trade, any restrictions on Indonesian shipments would have an outsized impact on the market.

Indonesia successfully implemented a nickel ore export ban in 2020, forcing Chinese stainless steel mills to invest in Indonesian nickel pig iron and ferronickel capacity. The government is pursuing a similar playbook for tin, with a long-term goal of forcing electronics and semiconductor companies to build manufacturing facilities in Indonesia to access its tin production.

While the nickel export ban has been highly effective, Home explains the dynamics around tin are more challenging given the high-tech nature of its end markets:

"You're going to persuade all the world's circuit board companies, all the semiconductor guys to come and relocate to Indonesia so they can use Indonesian tin in their soldering? You know, this is a very well-established supply chain, with Chinese, Taiwanese, Hong Kong, other Asian players. No one's really going to do that."

Nonetheless, the risk of an Indonesian export ban will continue to hang over the tin market until there is more clarity on how the government plans to implement its downstreaming ambitions. In the meantime, the uncertainty is likely to act as a premium on tin prices and incentivize stockpiling by consumers.

Lack of New Supply

Beyond the near-term disruptions in Myanmar and Indonesia, the global tin industry faces a structural supply deficit due to a lack of new mines in development. Tin is typically found in small, high-grade deposits that are not of sufficient scale to attract major mining companies. The pipeline of new projects is limited and funding for junior developers remains tight.

Moreover, over 80% of global tin reserves are located in just five countries - China, Indonesia, Peru, Bolivia and Brazil - all of which face varying degrees of political, regulatory and environmental risks. The US Geological Survey estimates there are just 12 years of tin reserves remaining based on current production rates.

Forecasts on refined tin demand will outstrip supply by 40,800 tonnes between 2022 and 2030, with annual production plateauing at 290,000 tonnes while consumption is rising to 400,000 tonnes. The electronics, EV and energy transition boom is set to drive a 3-4% CAGR for tin demand this decade, leaving a wide supply gap to fill.

"We've maybe got structural issues around whether Indonesia really wants to be a supplier of refined tin as it is at the moment. We have not got that many new projects coming on. A lot of the big mining companies - tin tends to be too small for them, so that's left to very junior companies, who quite often struggle to get funding for this sort of project," cautions Home.

The Investment Thesis for Tin

The case for investing in tin can be distilled down to three main drivers:

• Tin has strong demand fundamentals as an essential input for the electronics, semiconductor, EV, renewable energy, and AI industries. These high-growth sectors should underpin a 3-4% CAGR for refined tin consumption through 2030.
• The market faces severe near-term supply disruptions from the Myanmar mine shutdowns and uncertainty around the scope and timing of Indonesia's planned export restrictions on tin and other unprocessed metals. These risks could trigger a market deficit as soon as 2023-24.
• On a longer-term basis, the lack of new tin mine supply and continued depletion of existing reserves should lead to structural shortages by the end of the decade. Junior miners will struggle to fill the supply gap given the difficulty in financing small-scale, high-risk projects.

While the long-term outlook for tin is bullish, it's important to recognize the metal can be subject to extreme volatility due to its relatively small market size (annual demand of 400,000 tons vs. 25 million tons for copper). Tin prices can fluctuate dramatically on sudden supply disruptions or shifts in investor sentiment.

As Homes notes, "It's a 400,000 ton global market - small things can make big impacts in a market of that size. And the tin price history tells you how volatile it can be because of, I call it, continuously challenged dynamics."

In summary, tin is an often ignored but increasingly critical metal that offers compelling investment merits due to its necessity in a range of fast-growing clean energy and technology applications. The near-term Myanmar and Indonesia supply risks are likely to support elevated tin prices and could trigger a market deficit in the coming years.

Looking out longer-term, the lack of new mines in development and continued resource depletion mean tin is likely to face persistent supply shortages heading into 2030. Junior miners will be hard-pressed to fill the production gap, leaving consumers exposed to a tight market. For investors willing to ride out the volatility, tin provides an attractive way to play the global energy transition and exponential growth of EVs, electronics, and AI.