A Changing Global Tin Market May 29, 2015 Cui Lin Chief Representative of International Tin Research Institute in China

Price comparison between tin and other LME metals LME and tin price index (2000 =100) Tin LME Comparison of price between April 2015 and April 2014 Zinc Aluminum Lead Copper Nickel Tin Index

Moves in trend and the confusions!  Tin has ever been one of the most popular LME metals, but now tin price has the worst performance  Downsizing becomes the biggest concern of stakeholders for the tin market, but the tin consumption recovered slightly in the last two years  China was one of the fastest growing consumers, but now (thanks to Burma) it has become the fastest growing producer  No one would expect that Indonesia may cut its output——but it indeed happened!  It is expected that 2015 will see a short supply-dominated pattern again—— despite that the error rate of estimation may be very high

Critical tin statistics in 2014: forecast error  The figure compares the output/consumption forecast for February 2014 with existing data The global tin consumption is better than the original expectation  The global tin consumption is better than the original expectation  The main shock comes from China’s output growth  The slump of Indonesia’s output (including overseas re-refining) is slower than expected  Output in other regions is the same as expected  The global balance situation was changed from the expectation that the undersupply would exceed tons to the fact that the oversupply is more than 5000 tons 000 tons Global balance Indonesia’s output China’s output Global demand Comparison between results and prediction for 2014

Global tin consumption growth trend Data:ITRI Tin concentrate (kt) Fitting trend curve: The annual growth rate is 1.9% ITRI’s tin consumption survey covers the past 11 years

Above-trend demand growth Tin consumption according to filed of application Ton Consumption of each application field Solder Tinplate Chemicals Brass and bronze Float glass Others Total Change range ％

LME metal consumption’s global growth situation Global consumption index, and the base number in the year of 2000 = 100 Data source: tin data come from ITRI, and data of other LME metals come from CRU Alumin um Copper Nickel Lead Zinc Tin

Tin consumption of different industry sectors Consumer electronics Transportation Packaging Building Industry Others Solder-electronics Solder-industry Tinplate Chemicals Brass and bronze Float glass Others

Change of proportions of global mines’ output kt China Indonesia Malaysia Bolivia Peru Other regions Decline in Indonesia and Peru Growth in Myanmar (and Africa)

Indonesia’s export has been declining 12-month moving total of metals examined before export Export suspension-4th quarter of 2011 Lowest price in August 2012 New export laws implemented since July 1st, 2013/August 30 and November 2014 Global financial crisis

Impact of Indonesia’s new export laws Total volume examined before export since implementation of new export laws Others Solder Tin ingot

Output of South America’s mines Tin content in tin concentrate (kt) Bolivia Brazil Peru

Import volume of concentrate from central Africa * India, Russia, Germany and Bulgaria Other countries* China Thailand Malaysia Total weight (000 tons)

Small and manual mining operations Emerging Burma’s supply channel: Lack of data, but rapid expansion may indicate low cost –Mostly in Indonesia Cost (US dollar/ton) Cash cost in 2014 after ITRI deducted the cost of by-product (US dollar/ton tin) % in the cumulative tin output Small mining operations are at high cost

The base price fell in 2015, but it will rise in the next years Cash cost after ITRI deducted the cost of by-product (US dollar/ton tin) 2019 ~ 21,000 USD 2014 ~ 17,200 USD 2015 ~ 15,900 USD The base price of about 16,000 USD is based on the assumption that the market is caught in an oversupply (market equilibrium price would be higher) Cost (US dollar/ton) % in the cumulative tin output Besides, other fixed costs must be considered Falling oil price and strong dollar lower the cost in 2015

The model predicts that the long-term market equilibrium price is about 25,000 USD Full costs of ITRI in 2019 after deduction of by-product costs (USD/ton tin) Long-term market equilibrium price is about 25,500 USD 100%≈300,000 tons Cost (US dollar/ton) % in the cumulative tin output

China’s raw material supply pressure is largely mitigated kt Data source: ITRI, CRU,CNIA *Reported output after 2013 (inclusive); the official did not announce mines’ output after 2013 China’s raw material source Import volume of crude tin for refining purpose Output of recycled refined tin Import of concentrate Unreported mine output Reported mine output *

Significant increase of concentrate import Mainly from Burma Grade of 60%-70% imported concentrates is 10%; and that of the rest is 20%-35% Low price and seasonable factors caused a decline of import value for consecutive five months Mainly from Burma Grade of 60%-70% imported concentrates is 10%; and that of the rest is 20%-35% Low price and seasonable factors caused a decline of import value for consecutive five months Import volume of China’s tin concentrate (material object) Myanmar Others

Significant increase of tin concentrate output ton Data source: ITRI, CNIA China’s tin concentrate output ton Refined tin output year-on-year growth

Slowing growth of China’s consumption ton China’s tin concentrate consumption structure, 2014 China’s tin consumption China’s tin consumption year-on-year change Solder Tinplate Chemicals Brass and bronze Glass Lead-acid battery Others

Declining growth of electronic industry Data source: State Statistics Bureau % Year-on-year growth rate of the output of main electronic products in China Domestic washing machine Household refrigerator Mobile telephone Computer-complete machine Microcomputer Colour TV set

New areas of demand are showing their potential Year-on-year growth of consumption in all areas in the last three years In 2014, the new Access Conditions to China Lead-acid Battery Industry started to be implemented, which stipulates that the tin content should be increased from 0.2% to 1.2%. The large scale lead-acid battery market, relatively low tin price increased the market competitiveness of tin chemical products, the turnabout of economy in Europe and US drove a significant growth of export of tin chemical products used for building purposes. A shifting relationship between growth of LED and auto electronics and the miniaturization of electronic products; Lead-acid battery Brass and bronze Tin chemistry Tinplate Solder

There is still large inventory ton Domestic inventory change

The trend of trade becomes subtle and depends on interest margin between two markets * *export volume predicted based on import of other countries; the recent months’ data are incomplete export data ton net import net export

Arbitrage space reappears and the import increase is predictable Arbitrage space Domestic import price=LME spot price + 3% tariff + 17% VAT LMB spot price, USD/ton, Domestic spot price, USD/ton Shanghai-Tin March futures closing price, USD/ton LME March futures closing price, USD/ton Domestic import price*

Influence of tin futures listing on SHFE Number of futures contracts traded in March at SHFE Large price fluctuating range Open interest and trade volume expand quickly, comparable to LME daily trading volume The single-day trade volume on May 7 reaches lots! (1 lot=1 ton) Large price fluctuating range Open interest and trade volume expand quickly, comparable to LME daily trading volume The single-day trade volume on May 7 reaches lots! (1 lot=1 ton) Yuan/tonlots

Influence of tin futures listing at SHFE 1.The domestic market’s investment and speculation factors increase and the fluidity is speeding up 2.The domestic price fluctuating range is greater 3.Change of domestic pricing model Bargaining pattern based on spot quotation Futures price+premium/discount ？ 4.Enhanced linkage between domestic and overseas markets 5.Investment demands alleviate the inventory pressure

Market outlook Data source: ITRI, China Customs, GTIS China’s supply and demand balance forecast Ton Output Adjusted net export China’s refined tin consumption Market equilibrium

2015 critical forecast matters China and Burma China’s tin concentrate output was increased from 175,000 tons in last year to 178,000 tons this year, and the mining quantity in Burma was increased from 30,000 tons to 35,000 tons. IndonesiaThe mining quantity was decreased from 86,000 tons to 78,000 tons, of which 73,000 tons were tin concentrate. Other supply quantities Output in South America keeps stable (slight increase in Brazil and Bolivia being set off by output decline in Peru). Slight increase in Australia and Africa DemandGlobal tin concentrate consumption quantity was increased to 367,300 tons, a growth rate of 1.7%. China’s growth rate (+3.1%) is greater than other regions of the world (+0.5%)

A predicted short supply (with high error rate) Recent “generally consistent” tin price prediction (Reuters survey made in April 2015) 2015=19,070 USD/ton2016= 21,465 USD/ton Recent “generally consistent” tin price prediction (Reuters survey made in April 2015) 2015=19,070 USD/ton2016= 21,465 USD/ton Table for global refined tin supply/demand balance (000 tons) Forecast Global Global refined tin output _ Selling quantity of DLA Global refined tin consumption Global market equilibrium Report stock LME Manufacturer Consumer and others Total Global sales-to-stock ratio (weekly consumption)

Complex mid-term viewpoint (1) The mining industry and metal price will rebound strongly by 2019, while chemical fertilizer will lag behind* 34 mining industries, metals and fertilizers covered by CRU Zinc, CPC, tin, nickel, coal tar, sulfuric acid, cobalt, Palladium, bauxite, metallurgical coke, metallurgical coal, copper, potassium carbonate Aluminum, lead, platinum, thermal coal, phosphorite ferrochrome, chrome ore, urea, crude oil and Brent crude oil Lead, silicon magnesium Phosphate, DAP, ammonia, silicon-magnesium and gold Metal, molybdenum, iron ore, sulfur and silver Hot Warm Mild Cool Cold Froze n

Complex mid-term viewpoint (2) Figure 4. Schedule for supply quantity of emerging raw material in urgent need on metal market Next six months 1-3 years 5 years above 3-5 years Chrome ore Nickel Bauxite Zinc Platinum family metals Copper Metallurgical coal Silver Gold Lead Ferrochrome Iron ore Uranium Thermal coal Manganese ore Steel Aluminum Tin NB: Exceeding projects already putting into production Data source: Macquarie research, May 2015

Price outlook before 2023 USD/ton 2020–2023 Predicted range: 20, ,000 USD/ton Middle predicted value (2014) Weakening in demand (2014) Limited supply quantity (2014) The most possible path recently

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