Industry Trend Analysis - Tin: Myanmar, Indonesia To Slow Global Production Growth - JUNE 2017

BMI View: Global tin production growth will decelerate over 2017-2021 compared to the previous five years, due to declining growth rates in Myanmar, DRC and Indonesia. Despite this, traditionally large producers such as China and Peru will moderately increase their growth rates, thus ensuring absolute numbers will keep on rising in the coming years.

We forecast global tin mine production to grow by an annual average of 4.5% over 2017-2021, down from 5.3% over the previous five years. This decline will be caused by a slowdown in Asian markets such as Myanmar and Indonesia, the latter as it struggles with increasing government regulations and the depletion of resources. Despite a weaker performance relative to the previous five years, Myanmar will remain the fastest growing tin ore producer with an average annual growth of 13.6%, followed by Vietnam at 6.4% during 2017-2021. In terms of absolute tonnage, China will dominate, producing an additional 3.0% per annum (ktpa) of tin to reach 121.1ktpa by 2021. However, China's share of global production will be reduced from 35.6% in 2016 to 34.2% in 2021 due mainly to Myanmar's increase in share from 12.3% to 19.2% over the same period.

Global Tin Ore Production Forecast (2012-2021)
Indicator 2012 2013 2014 2015 2016 2017f 2018f 2019f 2020f 2021f
e/f= BMI estimate/forecast. Source: BMI
Global Tin Mine Production, '000 tonnes 240.0 294.0 296.0 279.3 309.3 326.5 339.0 353.9 368.5 384.8
Global Tin Mine Production Volumes, % y-o-y -1.6 22.5 0.7 -5.7 10.8 5.6 3.8 4.4 4.1 4.4

Even with steady production growth in Peru and China, growing environmental concerns in Indonesia and shrinking supplies from alternative tin exporter Myanmar will prevent more significant growth in tin mine production. Looking beyond our forecast period to 2021, increasing environmental and supply chains standards regulations as well as ore depletion will become growing challenges. For instance, the World Bank forecasts global tin supply to become completely depleted in the next 18 years.

Myanmar To Close Gap On China
Global Tin Mine Production (kt)
e/f= BMI estimate/forecast. Source: BMI Calculation/USGS

Low Prices To Deter Exploration

Despite a modest uptrend in prices over the coming years, tin prices are expected to remain relatively suppressed and will only reach levels seen in 2013 by 2021. This will discourage exploration and mine development. As a result, our mine production growth forecasts represent a less positive supply picture than many mining firms would have anticipated several quarters ago. We forecast prices to average USD19,500/tonne in 2017, gradually recovering thereafter to reach USD22,500/tonne by 2021. Tin prices will gradually tick up in the long term, due to a persistent refined tin market deficit.

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Modest Recovery Ahead
LME Three-Month Tin Price
e/f= BMI estimate/forecast. Source: USGS, BMI Calculation

China - Yunnan Tin To Drive Domestic Growth

We forecast China's tin mine production to grow by an annual average of 3.0% over 2017-2021, a significant increase from the -2.6% average annual growth in the previous five years. Recent government regulations that are forcing manufacturers to replace antimony and cadmium in lead acid batteries with tin will boost tin production in the short term. Yunnan Tin will account for the bulk of growth in China's tin output over the coming years. Yunnan Tin is the largest tin producer in China, at around 40.0% of total output. This is followed by China Rare Metals and Zijin Mining, at approximately 10.0% and 8.0%, respectively. Yunnan Tin will be a key driver of output growth as it forges ahead with a pipeline of expansion plans at its Laochang and Wuchangping mines. China will remain the world's top producer of tin, with output reaching 121.1kt in 2021. Despite this, downside risks remain with regards to China implementing supply side reforms aimed at tackling environmental concerns which will lead to a gradually declining growth rate in the coming years.

Chinese Growth Slowing
China Tin Mine Production ('000 tonnes, LHS) & Growth y-o-y (%, RHS)
e/f= BMI estimate/forecast. Source: BMI, USGS

Peru - Improved But Slow Growth Ahead

Peru's tin sector will experience moderate but positive production growth over our forecast period to 2021 compared to the previous five years of declining growth due to declining ore grades and a weak project pipeline. Following successive declines in production from 2009-2017, we expect Peru's tin output to increase gradually from 17.8kt in 2017 to 19.3kt by 2021, averaging 1.4% annual growth . The country has lost considerable market share, from 10.9% in 2012 to only 5.5% in 2017, although its global presence will stabilise in the coming years as production growth picks up again over 2017-2021. Within Peru, we expect the tin sector to be dominated by Minsur, as no significant mining plans have been announced by other companies. The country's tin production comes solely from the San Rafael mine, which is the largest underground tin mine in the world, producing around 6.0% of global tin supply.

Minsur will continue to target reduced costs as tin prices begin to stabilise over the coming quarters. The firm recorded a decline in output of 18% y-o-y during Q117, in line with the slight decrease in production we expect for the country in 2017. However, cash costs during the same period remain competitive, at USD62.0/tonne, 47.0% below the corresponding quarter of 2016. A key project at the San Rafael mine will be the USD20.0mn construction of a pre concentration plant that uses X-ray technology to select and segregate higher grade ore from uneconomically viable ore, which began in June 2016.

Peru Growth To Improve
Peru - Mining Industry Growth (% y-o-y)
BMI Calculation/USGS

Indonesia - Slow Growth Due To Environmental Clampdown

We forecast that Indonesia's tin mining production will slow in the coming years due to a clampdown on miners and restrictions on offshore mining. We forecast Indonesia's tin mine production to register an annual average growth of 2.2% during 2017-2021, compared to 15.3% during 2012-2016. As a consequence, we forecast Indonesia will lose its place as the second largest supplier of tin, to Myanmar, by 2019.

Tin production will be constrained in 2017 as registered tin exporters struggle to obtain the 'Clean and Clear' (CnC) certification from the government which is a requirement in order to export tin from November 1, 2015. As of June 2016, only 498 out of 755 IUP mining licence-holders had obtained the CnC certification. In February 2016 the Indonesian government started auditing of 33 tin smelters in Bangka Belitung to assess whether to allow their tin exports. Since January 2016, the country's largest tin producer, PT Timah Tbk, stopped production in Kelabat Bay after orders from the local governor in Bangka to halt offshore mining following complaints from fishermen and NGOs about environmental damage caused by dredging.

Global Selected Tin Projects
Global Selected Tin Projects
Source: BMI Global Mines Database
Country Company Mine Output Year
Australia Colet Mining and Development Corporation Mount Garnet Consolidated Tin Mines with a view to developing a low cost operation with an eventual annual output of 5,000t/y of tin. 2015
Australia Venture Minerals Mount Lindsay Probable Reserves: 7.3mnt Operational
Bolivia Comibol Huanuni Output Increased to 14,610t/y in 2014 from 7,897t/y in 2013 Operational
Bolivia Comibol Colquiri Output expected to increase to 8,033t/y in 2025 from 3,312t/y in 2013 Operational
China Yunnan Tin Co Ltd Laochang Latest Output: 35,000t/y Operational
China Yunnan Tin Co Ltd Wuchangping Latest Output: 17,000t/y Operational
DRC Alphamin Resources Bisie Mine in construction in Q117 and expected to reach full potential in 2019 In Construction
Indonesia Timah Persero Tbk Pt Inland Mines Latest Output: 11,000t/y Operational
Indonesia Timah Persero Tbk Pt Offshore Mines Latest Output: 19,000t/y Operational
Indonesia PT Koba Koba Latest Output: 2,000t/y Operational
Malaysia Malaysia Smelting Corp Rahman Hydraulic Tin Latest Output: 2,200t/y Operational
Peru Minsur SA San Rafael Latest Output: 23,100t/y Operational
Peru Minsur SA Bofedal II Expected Output: 6,300t/y 2016

Myanmar - Slowing Growth But Still Strongest Overall

The global slowdown in tin production growth will come in large part as a consequence of declining growth levels in Myanmar. The country experienced spectacularly high average growth levels of 3 3.5% over 2012-2016, during which it has increased its tin production from 10.0kt to an estimated 50.0kt. This boom came about in 2011 following the end of the military dictatorship which had isolated the country. However, growth levels will inevitably adjust in the coming years following the initial growth spurt when the country was coming from a very low base. As such, despite the fact that Myanmar will remain the fastest growing tin producer in the world with an average growth of 13.6% over 2017-2021, this nevertheless represents a significant decrease on the growth levels experienced during 2012-2016.

The majority of the country ' s tin production is sourced from opencast mines at Man Maw in the autonomous Wa region , which is controlled by the United Wa State Party (UWSP) . The country ' s production of high grade ore has surged more than 10-fold in four years in Wa, according to the International Tin Research Institute. The country is already one of the top exporters of tin to China, due to its proximity to Chinese Yunnan province, where China ' s biggest tin producer, Yunnan Tin, operates from. We forecast Myanmar to surpass Indonesia as the second largest producer of tin by 2019, and to account for 19.2% of global production by 2021. Downside risks to our forecast will emanate from the possibility of opencast mining shifting to underground mining in the country, meaning production could slowdown in the coming years.

Myanmar To Be Growth Outperformer
Select Countries - Mining Industry Growth (% y-o-y)
e/f = BMI estimate/forecast. Source: BMI/USGS

Risks To Outlook

The risks to our production forecast are slated to the downside. Details on tin mining projects and expansion plans in countries such as Myanmar and China are hard to obtain and our forecast may ultimately prove to be too optimistic. Furthermore, a tighter-than-expected clampdown on tin mining activities globally (and particularly in China) due to environmental concerns, could significantly impair mine supply over the coming quarters. As an example, on April 21 2017 it was announced that major tin producers have agreed to begin reporting on Code of Conduct standards by Q317, as a prerequisite for membership in the International Tin Research Institute (ITRI).