Tin Handbook Commodities and Export Projections Division Economic Analysis and Projections Department ferary 1981 TABLE OF CONTENTS Page :;o. I. THE CHARACTERISTICS OF TIN.............................. 1 A. Physical............................ ..........4......... 1 B. End-uses...... ............ .............. ...... 3 C. Reserves................................................. 5 II. THE LOCATION OF THE INDUSTRY................................. 1 A. Production.. . . . . ................................ 1 B. Smelting .............. . ............ .... ............ 5 C. Consumption........ I . .. * ........ .. . ........ *. 8 D. Trade............... ............... . ........ .. .. . 10 III. THE STRUCTURE OF THE INDUSTRY................................ 1 A. The Degree of Integration; Control....................... 1 B. Production and Trade Arrangements in Force............... 2 C. The International Tin Agreements......................... 3 IV. ECONOMIC PARAMETERS USED IN THE MARKET ANALYSES OF THE INDUSTRY.... t .... ....... o . ................... 1 A. Supply Elasticities.................. ......... 1 B. Demand Elasticities.................................... 3 C. Institutional Market Structures Affecting Prices.....4.. 5 V. MARKET PRICES....... .............. ......................... 1 February 1981 Page No. VI. SPECI.4L ISSUES.. . . . . . . . . . ....................... 1 A. Competition from Substitutes............................ 1 B. Sixth International TinAgreemnt....................... 1 Tables I-1 Consumption of Tin by Major End-Users in Selected Countries, 1974-76..................................................... 1-7 1-2 World Tin Reserves........ .......... ......... .... 1-9 II-1 Tin - World Mine Production, by Main Countries and Economic Regions . ............ ..... ...... .. .. ............ . 11-2 11-2 Percentage Distribution of Output of Tin-in-Concentrates by Mining Method in Selected Countries.........*............ 11-3 11-3 Production of Tin Metal as a Percentage of Production of Tin-in-Concentrates .......................... ......... .. 11-6 11-4 Primary Tin Metal, Production and Smelter Capacity, 1977... 11-7 11-5 Tin - World Consumption of Primary Tin, by Main Countries and Economic Regions............................. 11-9 11-6 Tin - World Exports (Volume), by Main Countries and Economic Regions........................................... II-11 11-7 Tin - Exports in Concentrates and Metal, Selected Exporting Countries, 1960 and 1979............ ............. 11-12 III-1 Price Ranges in the Tin Agreements......................... 111-5 IV-1 Tin Demand Elasticities.. ............................ IV-2 IV-2 Tin Supply Elasticities..................................... IV-4 IV-3 Tin Prices............................. .. ... ........... IV-7 V-1 Tin Prices.................................. ....... . ........ . V-4 VI-1 Conversion Factors...................................... VI-3 Charts 1 World Tinplate Production & Tin Used....................... 1-8 2 Fifth International Tin Agreement..... .................. v-5 I. CHARACTERISTICS OF TIN A. Physical 1. Tin is one of the oldest metals known to man. Pure tin was i.-ed in Egypt as early as 600 B.C., but it had been ueed in bronse implements any cen- turies earlier. Bronze containing 20% tin has been found in the royal cemetary of Ur dat!ag from around 3500 B.C. It was the alloying of tin with copper to make bronze that marke' ae of prehistoric man's most significant liscoveries and enabled utensils, wL.ipons and decorations to be fashioned in a material that was far superior to stone. By Roman times tin was being fairly widely used both in bronze and in other applications such as for tinning copper vessels. Around this time a high proportion of the tin used in the civiiized world was mined in Cornwall, U.K. and this continued up to the 19th century. 2. Tin is a relatively scarce element. Tin deposits are generally asso- ciated with acid igneous rocks. The only mineral of commercial importance as a source of tin is cassiterite. Cassiterite has a high specific gravity (6.8 to 7.1), a hardness of 6 to 7. The main sources of tin are placer and alluvial deposits, derived from weathering and erosion of vein (narrow ore bodies) and disseminated replacement tin deposits. It has been found that, in general, mineral depositiofn occurs in successive stages as the granite cools with parti- cular minerals normally being found in predictable zones, cassiterite being the metallic mineral crystallizing nearest the heat source. In Bolivia, one of the world's largest producers of tin, mineral deposition has taken place at much shallower depths within the earth's crust so that cooling of the igneous rocks has been rapid, resulting in very rich deposits having a highly complex mineral- ogy due to the telescoping of the zones. Bolivian cassiterite consequently tends to be closely associated with other ore minerals, such as tin-bearing sulphides of silver and bismuth that are rare elsewhere in the world with the result that complexities arise when the tin comes to be extracted from the ore. 3. In the placer deposits, the cassiterite is relatively free of impuri- *1 ties because it has greater resistance to weathering than the minerals associated February 1981 I-2 with it. In fact about 802 of all tin mined is of this type. Such deposits are particularly important in Malaysia, Indonesia, Thailand, Nigeria, Zaire, Brazil and parts of Australia. In certain areas, most notably in Southeast Asia, important alluvial deposits occur just below sea level where they were laid down during the past two mi1ion years when the sea level vas lover. These cre now frequently mined by dredging, and a feature of their mining is that it can be economic to work deposits that contain a very low percentage of tin, down to as low as 0.01%, Sn, because of the relative simplicity and efficiency of modern dredging operations. Owing to their prolonged exposure to air and water and good gravity separation alluvial placer deposits often contain cassiterite free from impurities. Concentrates obtained from them may have a tin content as high as 76% constituting a good smelter concentrate. 4. Tin ore from lode deposits is reduced to the necessary size by con- ventional crushing and grinding. The ore is corcentrated by gravity methods involving screening, classification, jigging and tabling. The concentrate is usually a lower grade (40 to 60% tin) than placer concentrate owing to associa- ted sulfide minerals. The sulfide minerals are removed by flotation or magnetic separation with or without magnetic rcasting. Despite considerable research, flotation of tin ore has never been completly successful. 5. Most secondary tin is recovered in the form of bronze, brass, solders and other alloys. About 10% of the secondary tin is recovered as metal from new, clean tinplate scrap. 6. Tin is a metallic chemical element which has the characteristics of extraordinary malleability and ductibility at low temperatures, softness, lightness, corrosion resistance, anti-friction ability and easy conductivity and fusibility. Sometimes these properties make tin the indispensable metal and often the preferred metal for a wide range of uses in modern industry. 7. Its malleability at low temperatures, together with its softness and lightness, means that it can easily be rolled or beaten into thin sheets and used as a foil for electrical condensers and wrappings. February 1981 1-3 8. The ability of tin to resist attack by air and by many of the organic acids often present in food has resulted in the metal being used in the form of tinplate for making containers of foods. Tinplate is steel sheets plated with a thin layer of the corrosion resistant tin. This property of easy conductivity means that the covering of tin over steel is much more continuous than is possi- ble with, for example, nickel plating. 9. The ease with which tin can be alloyed with other metals and the desirable properties that such mixing produces have given rise to the important tin-alloys industry. Today tin-copper alleys such as bronze, gunmetal and brass are used for coinage, bearings, high-pressure steam plants and military hardware, etc. 10. The anti-friction property of tin has produced a whole group of bearing metals such as babbitt, white metal alloys, where tin is alloyed with varying amounts of antimony, copper and lead. 11. The high fusibility of tin has produced the tin-lead alloy known as solder, which is used to join the edges of less fusible metals. The addition of lead lowers the melting point of the solder while increasing its strength considerably. B. End Uses 12. The uses of tin are many and varied. The use of tin as a coating on steel sheets to form tinplate accounts for about 40%, solder 28%, white metal and pewter 7%, chemicals 7%, bronze 6%, tinning 4% and others 8% (Table 1). 13. Over the past 29 years, the world production of tinplate has progres- sively increased, except for a marked fall in 1975 arising from the depressed economic conditions (Chart 1). It is clear that tin use has not increased as rapidly as the production of tinplate. This is due to the development of pro- gressively thinner tin coatings on the steel. The percentage by weight of tin February 1981 14 in a typical tin can has decreased from about 1% 29 years ago, to 0.53% at the present time. There is also a trend towards the use of thinner steel sheets which, for a given tin coating, would increase some in value in the overall per- centage of tin. 14. Another change in recent years, which is still continuing, is in the pattern of world tinplate production. In 1950 the USA produced approximately .1 million tons of tinplate out of a world production of about 5.7 million. In 1979, however, the production in the USA had increased only slightly to about 4.2 million tons in comparison with 14.2 million for the whole world. This means that, whereas the USA produced approximately three-quarters of the world's tinplate 29 years ago, this has decreased to less than one-third. Pro- duction is now becoming much more widespread. 15. The second largest use for tin is in tin-lead solders, where advantage is taken of the ability of tin to melt at relatively low temperatures. The range of applications varies from doing little more than filling a hole - such as, for example, a body-filling material in car production - to very sophisticated jointing procedures as in the electronics industry. 16. The use of tin as in alloying element for copper still continues to be a significant tonnage use and is iikely to remain so in the foreseeable future. The use of tin-bronze has remained economically viable, due, in part, to the re- cycling of scrap; something like half of the new bronze cast in a given foundry is likely to come from secondary material. Other end-uses of tin are tin bearings, tin alloy coatings, sintered iron components containing tin additions. 17. A new use for tin, developing at the present time primarily in the USA, is as an alloying element in maintenance-free batteries. A whole aspect of tin usage which has not yet been considered is that of tin chemicals. A completely different field of application for tin oxide is as a catalyst, and research over a number of years had led to the development of various mixed ixide systems based on tin, of considerable potential. Tin oxide base cata- lysts are being considered as constituents of filters for cigarettes. There are a number of new ar-as for significant growth of consumption and perhaps one oi 6he most important of these is in the development and use of organotin com- pounds, particularly for agricultural purposes. Organotin compounds are very effective in protecting certain crops such as potatoes, sugar beet and rice against disease. One of the outstanding properties of tin metal and Its com- pounds is its complete non-toxicity. The acst important tonnage use so-far for organotin is as stabilizers in PVC, where a compound such as dioctyl tin is added to give and retain the clarity of the plastic. Hch of the cost of the compounds is in the manufacturing process rather than in the cost of the tin itself, so that the development of improved processing could offset to some extent the effect of higher tin price levels. C. Reserves 18. As one known analyst puts it, "the calculation of ore reserves is a matter of economics. What was not an economic grade of ore at oni point in time might become economic at a higher price level and vice versa." 1/ Ore W reserves are not immutable. Estimates have varied with time, and are generally valid for the economic conditions of cost and price at the precise time the ore reserve calculation was made. 19. Malaysia, Thailand and Indonesia account for 41%, Bolivia 10%, Australia 3% and China and USSR for 27% of the total world tin reserves (Table 2). There are adequate reserves of available tin to meet world demand for at least the next 30 years. Prof. Hasking in his paper to the Fourth World Con- ference on Tin said, "We can feel sure that we have a breathing space, perhaps from say 50 to 150 years, perhaps considerably less than the lower figure, dur- ing which our house must be put in order." 2/ 20. On-shore reserves of high-grade ore in the traditional tin mining areas of Southeast Asia are declining rapidly, and the prospects of locating 1/ See Reference No. 1 at the end of'this section. 2/ See Reference No. 1 at the end of this section. February 1981 I-6 new deposits appear to be slim. Eigh tin prices in recent years have stimula- ted an intensive search for off-shore deposits in the shallow waters off the coasts of Thailand, Indonesia and Malaysia. A major step forward in interna- tional cooperation in this field has been achieved with the setting up of the South-East Asian Research and Development Center in Malaysia. This center will be partly financed by the United Nations Development Program and partly by the governments of Indonesia, Malaysia and Thailand. The Center will assess region- al tin potential and help in both carrying out exploration and promoting indus- tries using tin. The projects which have been earmarked include development of new and improved hydraulic mining techniques in Malaysia and exploration of tin in two areas in Thailand. jabl_I-1: CONSUMPTION OF TIN BY MAJOR END-USERS' IN SELECTED COUNTRIES, 1974-76 /a End Use Percent of Total Tinplate 42 Solders 24 Bronze and Brass 7 Whitemetal and Babbit 9 Chemicals 6 Tinning 4 Others 8 /a Include.. US, France, Germany, Italy, UK, Japan, Australia, Austria, Switzerland, Brazil and India. Source: International Tin Council, The Interna- tional Implications of the United States Disposal of Stockpiled Tin, 1973, and Tin Statistics, 1966-76. Chart 1: WORLD TINPLATE P1DUCTION & TIN USED 15FTWOlat eoductionA. -10 - * * _- .0 . . ,in used 5 Tin in t t z; S - 04 H . EN I l l t l I i I...lLt l J -L .LL L . . 1950 55 60 65 70 7S 2 Sources: International Tin Research Institu*e, Technological Developments in Tin Consumption Combat Substitution. International Tin Council: Monthly Statistical Bulletin, various issues. February 1981 1-9 Table I-2: WORLD TIN RESERVES ('000 tons mtal cemtat) Country Reserves Thailand 1,200 Malaysia 1,200 Bolivia 980 Indonesia 1,550 Brazil 400 Burma 500 Nigeria 280 United Kingdom 260 Zaire 200 Australia 330 China 1,500 USSR 1,000 Others 300 WORLD TOTAL .9 .0 Source: US Bureau of Mines, Mineral Commodity Summaries 1980. February 1981 I-10 References 1. International Tin Research Institute, Proceedings of the First International Tinplate Conference, London 1976 (Greenford, International Tin Research Institute). 2. Quarterly Review of the Tin Research Institute, Tin and Its Uses, various issues (Greenford, International Tin Research Institute). 3. US Bureau of Mines, Mineral Comodity Data Summaries, 1980. 4. K.L. Harris, Tin , in Minerals Facts and Problems, 1975 ed., United States Department of Interior, Washington, D.C., Government Printing Office, 1976. 5. W.K. Buck, General Discussion and Summing Up, Fourth World Conference on Tin, Vol. 1, 169, International Tin Council, 1974. 6. International Tin Research Institute, Technological Developments in Tin Consumption Combat Substitution (Paper presented at the International Tin Symposium, La Paz, Bolivia, November 1977). 7. International Tin Council, Monthly Statistical Bulletin, various issues. February 1981 II-1 II. LOCATION OF THE INDUSTRY A. Production 1. Production of tin-in-concentrates is concentrated in a few developing countries. Six of them - Malaysia, Thailand, Indonesia, Bolivia, Nigeria and Zaire - account for about 70% of world mine prnduction, while some 20 others account for a further 6Z. The industrialised countries - mainly Australia and the United Kingdom - account for 7%, while the centrally planned economies account for the remaining 17% (Table 3). 2. The bulk of the Malaysian tin deposits lies within a strip, 400 miles long and 50 miles wide, that runs along the western coast of peninsular Malaysia. The specific form and grade of the cassiterite mined determines the basic mining techniques adopted, which in turn affect the size of the production units. In Malaysia the tin deposits are mainly alluvial and the techniques adopted are variations of the simple washing operation. These are classified as dredging, gravel pumping, hydraulicing, open-casting and dulang washing. Table 3 shows that dredging was the dominant form of mining in 1961 but it accounted for only 32% in 1979 as compared with 35% and 54% for gravel pump sector in 1961 and 1979 respectively. Gravel pumping is labor-intensive in relation to dredging and is largely operated by small producers because of the low capital requirements. 3. The geographical concentration of the p:oduction of tin-in- concentrates in Indonesia is even greater than it is in Malaysia. The cin depo- sits are almost entirely alluvial. The mining methods are similar to those used in Malaysia, the only major difference being more usage of off-shore dredges in Indonesia. The most important mining methods are dredging and gravel numping, accounting for about 40% and 45% of the Indonesian output. The rest comes from hydraulicing, open-casting and dulang washing (Table 4). cr Table I-1: TIN - WORLD MINE PRODUCTION, BY MAIN COUNTRIES AND ECONOMIC REGIONS Actual 3hares Growth Rateq 1960 1965 1970 1975 1977 1978 1979 1960 1970 1979 1960-7i --------------------------- ('000 tons) --------- -------- (%) --------- per annum) Industrialized Countries 4.7 6.7 12.1 13.8 15.6 15.6 15.5 2.4 5.5 6.5 5 6.5 Australia 2.2 3.9 9.0 9.3 10.7 11.7 12.0 1.1 .1 5.0 9.3 United Kingdom 1.2 1.3 1.8 3.3 3.9 2.8 2.4 0.6 0.8 1.0 3.8 Other Industrialized 1.3 1.5 1.3 1.2 1.0 1.1 1.1 0.7 0.6 0.5 -0.9 Developing Countries 133.3 146.9 172.9 163.8 173.0 181.3 184.6 70.7 79.0 77.2 1.7 Malaysia 52.8 64.7 73.8 64.4 58.7 62.7 63.0 28.0 33.7 26.4 0.9 Indonesia 23.0 14.9 19.1 25.3 25.9 27.4 29.4 12.2 8.7 12.3 1.3 Thailand 12.3 19.4 21.8 16.4 24.2 30.2 34.0 6.5 10.0 14.2 5.5 Bolivia 20.5 23.4 30.1 28.3 33.6 30.9 27.8 10.9 13.7 11.6 1.6 Brazil 1.6 1.2 3.6 5.0 6.4 6.6 7.4 0.8 1.6 3.1 8.4 Ni eria 7.8 9.7 8.0 4.7 3.3 2.9 2.8 4.1 3.7 1.2 -5.2 ZIre 9.4 6.3 6.5 4.6 3.9 3.5 3.3 5.0 3.0 1.4 -5.4 South Africa 0.7 1.0 2.0 2.8 2.9 2.9 2.7 0.4 0.9 1.1 7.4 Southern Europe 0.9 0.7 0.9 1.1 0.9 1.1 0.7 0.5 0.4 0.3 1.3 Other Developing 4.3 5.6 7.1 11.2 13.2 13.1 13.5 2.3 3.2 5.6 6.2 Market Economies 138.0 153.6 185.0 177.6 188.6 196.9 200.1 73.1 84.5 83.7 2.0 Centrally Planned Economies 50.7 36.0 34.0 37.1 37.4 38.7 38.9 26.9 15.5 16.3 -1.4 WORLD TOTAL 188.7 189.6 219.0 214.7 226.0 235.6 239.0 100.0 100.0 100.0 1.2 . Sources: International Tin Council, Monthly Statistical Bulletin,and Metallgessellachaft, A.G.; Metal Statistics, variour issues. ** Table 11-2: PERCENTAGE DISTRIBUTION OF OUTPUT OF TIN-IN-CONCENTRATES BY MINING METHOD IN SELECTED COUNTRIES (1978) to Method Malaysia Thailand Indonesia Bolivia Australia United Kingdom Dredges 32.0 17.6 49.6 2.0 5.1 Gravel Pumps 53.5 31.5 44.2 Open-cast 4.5 34.2 Underground 2.2 98.0 60.7 100.0 Dulang Washing 5.1 3.6 Suction Boats 33.8 Other 2.4 13.9 Source: International Tin Council, Monthly Statistical Bulletin 11-4 February 1981 4. The deposits in Thailand are alluvial in nature. Gravel pumping and hydraulicing are the most impurtant mining methods, producing about 50% of the Thai output in recent years. The decline in the relative importance of the dredging sector was brought about by the shortage of land for dredging, the aging of some of the dredges, and the greater flexibility and enterprise shown by the smaller gravel pumps. 5. Bolivia is the only major producing country where underground mining is the almost exclusive mode of production. This involves mining in hard rock in mountainous areas. The tin content of the ore is also much lower than in Southeast Asia. These characteristics mean that mining costs in Bolivia are higher than those in the alluvial mining areas. Brazil has assumed world sig- nificance as a producer with the discovery of alluvial deposit sin 1962. By 1980 Brazilian output was about 8,000 tons, accounting fcr about 3% of world output. 6. Tin deposits in Nigeria and Zaire are alluvial and the output from these two countries amounts to around 6,000 tons in 1980, or 2.5% of world total. The importance of these two African countries as producers of tin has declined in the past 20 years; in 1960 their combined output was 17,200 tons, or 9% of world total. 7. In Burma production is currently only about 700 tons annually. The mines suffered damage during the war years. 8. With a marked revival in interest in tin-mining in Tasmania, New South Wales, north Queensland, Northern Territory and western Australia in the 1960s, the Revision Mine in Tasmania has become the largest single producing unit in the world. The pattern of tin mining in Australia has been one of a large number of small but rich deposits, both alluvial and lode in origin. The output in 1960 was 2,200 tons and has gone up to 11,400 tons by 1980. 9. Like in Bolivia tin mines in the U.K, are underground mines, that involve working to depths of up to 3,000 ft.; the grade of ground worked and the February 1981 11-5 type of lode enco-Antered, contribute to the marginally economic nature of the industry - and explain the shortness of the profitability/loss making cycle that has been a prominent feature of the history of tin mining in the United Kingdom. Production in 1980 was about 3,000 tons, as compared with 1,200 in 1960. 10. Between 1960 and 1979 world production of tin grew at 1.22 per annum. Malaysia continues to dominate this production, although its share has declined gradually since the mid-1960s. Mine production in Bolivia has stagnated since 1972. Tin mining has been hampered by a poor investment climate, high costs, labor unrest and political problems. Mine production in Nigeria and Zaire has declined since the late 1960s. The only countries that have increased tin out- put significantly and constantly in the last decade are Indonesia, Thailand and Brazil. B. Smelting 11. Tin ores are usually treated on or near the mine site to produce a concentrate. The method of treatment depends on the nature and grade of the ore mined and the method of mining. The concentrate is then moved to a smelter either in the same country or abroad. Traditionally most of the producing countries' ores had to be smelted elsewhere. This pattern has changed substan- tially in recent years: now most of the major producers have modern smelting facilities of their own. Between 1962 and 1970 Nigeria, Thailand and Bolivia established smelters. Smelting capacity in Brazil and Spain was also increased substantially. Bolivia plans to have smelting capacity to process all its mine production. The establishment of smelters in these countries was considered to be the first step to encourage greater processing in the tin industry. Table 5 shows the production of tin metal as a percentage of the production of tin- in-concentrates in the major producing countries. 12. There are 43 primary tin smelters in the world, located in 24 coun- tries; they range from a 150 to 60,000 tons annual capacity. Excluding the centrally planned economies, the 13 largest smelters account for over 85% of the total estimated capacity of over 300,000 tons of refined tin. Indonesia now has the capability to smelt 33,000 tons of tin (Table 6). Table 11-3: PRODUCTION OF TIN METAL AS A PERCENTAGE OF PRODUCTION OF TIN-IN-CONCENTRATES Malaysia Indonesia Thailand Bolivia Nigeria Zaire 1960 147 9 0 0 0 0 1965 114 8 29 0 98 29 1970 124 47 101 0 100 22 1974 123 59 97 24 102 13 1975 129 70 101 25 100 15 1976 123 100 99 32 99 13 1977 113 93 95 39 102 17 1978 115 94 96 52 102 26 1979 116 94 97 57 104 27 Source: International Tin Council, Monthly Statistical Bulletin, Various Issues * February 1981 U-7 Zale11-4-: PRIMARY TIN METAL, PRODUCTION AND SMELTER CAPACITY, 1977 Production of Annual Primary Primary tin Tin Smelter Country Metal, 1977 Capacity 1/ --- ('000 tons)--------- AFRICA Nigeria 3.3 13.5 Rwanda - 2.5 2/ South Africa 1.5 5.5 3/ Zaire 0.7 7.0 Zimbabwe-Rhodesia 0.9 1.2 AMERICA Argentina 0.1 2.0 Bolivia 13.0 21.5 Brazil 7.4 17.4 Mexico 1.0 5.0 USA 6.7 8.0 ASIA China, P.R. 23.0 e/ 40.0 Indonesia 24.0 33.0 Japan 1.3 1.8 Korea, Rep. of 0.5 0.6 3/ Malaysia 66.3 130.0 Singapore - 5.0 Thailand 23.1 25.0 EUROPE Belgium 3.5 8.0 German Democratic Republic 1.1 e/ 1.5 3/ Germany, Federal Republic 2.9 3.6 Netherlands 2.1 2.5 Portugal 0.6 0.8 Spain 5.3 9.7 3/ United Kingdom 10.1 26.0 U.S.S.R. 25.0 e/ 40.0 Australia 5.6 6.5 TOTAL 229.0 417.6 1/ Theoretical capacity for production of primary tin metal; smel- ter capacity is frequently expressed as maximum tonnage of concentrates treatable per annum - the metal capacity is then calculaled based on the rated capacity of concentrates of average grade treated by that smelter. 2/ Under construction. 3/ Under expansion. 0 e/ Estimated. Source: International Tin Council, Monthly Statistical Bulletin, December 1980 February 1981 11-8 13. Scrap represents a significant, if stable, portion of tin metal supply. On the world basis recycled tin metal accounts for about 4% of total supply. In the US recycled tin metal makes up for about 4% of total metal con- sumption, while recycled tin in metal form and other forms accounts for 25% of total consumption. Aside from the United States no information is available on tin recovery in non-metal form. Tin scrap is mostly derived from the alloy uses of tin. It is reused as an alloy constituent of solder-bearing metals, brass and bronze. Only a fraction is recycled as pure tin metal. While re- covery of tin from clean tinplate scrap is economic, recovery of tin from recycled tin-plate cans is not economic at present. C. Consumption 14. Developed countries consume about 61% of world tin production, as compared with 71% in 1960; centrally planned economies account for about 24% of the total, as compared with 19.8% in 1960 and the remainder is consumed in developing countries (see Table 7). 15. The United States is the single most important tin consuming country with a share of about 21% of total world consumption, followed by Japan with 14%, the Federal Republic of Germany and the United Kingdom, each with about 6%. Industrialized countries' world tin consumption in the post-war period has grown more slowly than that of other metals: at 1.7% per annum from 1955-74, compared to 4.8% per annum for copper, 8.3% per annum for aluminum and 4.6% for zinc. Between 1977 and 1979 total demand in industrialized countries declined slightly. From 1960 onwards, consumption in industrialized countries has in fact fluctuated around z flat trend. When the developing countries and cen- trally planned economies are added in, the trend growth of world consumption becomes positive, but only slightly. Total consumption grew at an average annual rate of only 0.5% per annum between 1960 and 1979. The main reason for this slow growth was the increasing substitution of tin-free steel and aluminum for tinplate in can manufacturing. In addition, technical innovation has reduced the quantity of tin needed in tinplate. * . Table 11-5: TIN - WORLD CONSUMPTION OF PRIMARY TIN, BY MAIN COUNTRIES AND ECONOMIC REGIONS Actual Shares Growth Rates 1960 1965 1970 1975 1977 1978 1979 1960 1970 1979 1960-79 --------------------------('000 tons)------------------ ()---------M--------- (2 per annum) Industrialized Countries 146.2 143.4 148.2 131.8 140.8 135.8 140.0 71.2 68.0 61.9 -0.2 US 52.4 59.5 53.8 43.6 47.6 48.4 49.5 25.5 24.7 21.9 Japan 13.1 17.4 24.7 28.1 29.7 29.4 31.2 6.4 11.3 13.8 47 Western Europe 72.3 56.9 60.8 51.5 54.2 51.9 50.3 35.2 27.9 22.3 19 Other Developed 8.4 9.6 8.9 7.9 9.3 8.8 9.0 4.1 4.1 4.0 0.4 Developing Countries 18.4 20.6 25.1 29.9 31.4 32.9 32.0 9.0 11.5 14.2 2.9 South Africa 2.0 1.3 2.1 2.3 2.1 1.9 2.0 1.0 L.0 0.9 0.0 Southern Europe 3.4 4.8 6.3 8.3 7.3 7.8 6.8 1.7 2.9 3.C 3.8 Market Economies 164.6 164.0 173.3 161.0 172.2 171.4 172.0 80.2 79.5 76.1 0.2 Centrally Planned Economies 40.6 40.3 44.7 53.3 54.6 56.2 54.0 19.8 20.5 23.9 1.5 WORLD TOTAL 205.2 204.3 218.0 218.7 226.8 227.6 226.0 100.0 100.0 100.0 0.5 Sources: International Tin Council, Monthly Statistical Bulletin and MetallgesellscLaft, A.G., Metal Statistics. 10 February 1981 11-10 D. Trade 16. Developing countries dominate the tin trade: they account for 92% of total world exports of tin-in-concentrates 1/ and for almost 80% of world exports of tin metal (Table-8). Historically the flow of trade has been in the form of export of tin-in-concentrates from producing developing countries to consming developed countries. In recent years, the direction of trade has remained the same, but tin metal has substituted for tin-in-concentrates. 17. The importance of the trade in tin-in-concentrates has in fact de- creased drastically over the last 20 years as developing producing countries have expanded their smelting capacity. Malaysia already had sufficient srel- ting capacity to process its own tin concentrates before World War II. Indonesia, Thailand and Bolivia have increased their smelting capacity recently. They have increased their share of tin metal exports. Table 9 illustrates the change in the composition of exports during 1960-79 in the major exporting countries. 18. Developed countries absorb 85% of world tin metal imports, centrally planned economies about 10% and developing countries the remaining 5%. As a group the centrally planned economies have beti largely self-sufficient in tin and their trade in tin has mostly been intra-trade 2/. However, the USSR and China have on occasions exported significant amounts of metal to developed countries 3/. 1/ Exports of tin-in-concentrates largely reflect the imbalance between produc- tion and smelting capacity in the main producing countries. 2/ Only the Eastern European countries rely on imports fron outside the CPEs for a substantial amount of their tin requirements. 3/ For example, between 1957-60 and 1974-75. 0 ee* I 00 Table 11-6: TIN - WORLD EXPORTS (VOLUME), BY MAIN COUNTRIES AND ECONOMIC REGIONS Actual Shares Growth Rates 1960 1965 1970 1975 1977 1978 1979 1960 1970 1979 1960-79 -------------------------------('000 tons)--------------------- --------- ()-----------( per annum) industrialized Countries 30.5 32.2 32.5 20.8 27.9 29.4 27.1 13.7 14.6 12.6 -0.6 Australia - 0.6 4.8 6.9 7.5 9.1 8.1 - 2.2 3.8 6.0* United Kingdom 7.9 6.8 12.9 6.4 6.8 7.0 6.2 3.5 5.8 2.9 -1.3 Other Industrialized 22.6 24.8 14.8 7.5 13.6 13.3 12.8 10.1 6.6 5.9 -2.9 Developing Countries 157.7 149.7 184.3 163.6 171.3 182.2 186.4 70.8 82.6 86.5 0.9 Malaysia 77.6 74.6 91.9 77.6 63.2 70.1 72.1 34.8 41.2 33.5 -0.4 Indonesia 27.1 14.3 17.8 21.8 24.9 23.1 27.5 12.2 8.0 12.8 0.1 Thailand 12.8 15.9 21.8 16.6 23.3 28.9 32.5 5.7 9.8 15.1 5.0 Bolivia 19.7 27.7 29.6 26.5 30.9 29.3 25.7 8.8 13.3 11.9 1.4 Brazil - - - 2.8 2.1 4.3 4.7 - - 2.2 13.7** Nigeria 8.0 10.8 10.9 4.7 3.0 3.1 2.6 3.6 4.9 1.2 -5.7 Zaire 8.4 1.3 6.3 4.6 4.2 3.9 2.2 3.8 2.8 1.0 -6.6 South Africa 0.8 0.7 0.9 2.3 2.4 2.2 1.5 0.4 0.4 0.7 3.4 Southern Europe 0.3 0.4 1.7 1.6 1.6 0.2 0.4 0.1 0.8 0.2 1.5 Other Developing 3.0 4.0 3.4 5.1 15.7 17.1 17.2 1.3 1.5 8.0 9.6 Market Economies 188.2 181.9 216.8 184.4 199.2 211.6 213.5 84.5 97.2 99.1 0.6 Centrally Planned Economies 34.5 7.1t 6.2 12.9 3.7 5.5 2.0 15.5 2.8 0.9 -13.9 * WORLD TOTAL 222.7 189.0 223.0 197.3 202.9 217.1 215.5 100.0 100.0 100.0 0.2 * 1970-79 growth rate ** 1975-79 growth rate Sources: International Tin Council, Monthly Statistical Bulletin. February 1981 11-12 Table 11-7: TIN - EXPORTS IN CONCENTRATES AND METAL, SELECTED EXPORTING COUNTRIES, 1960 AND 1979 1960 1979 Ti-in- TAa-in- Concentrates Tin Metal Concentrates Tin Metal --------------------- (tons) Bolivia 18,632 1,086 11,354 14,355 Indonesia 25,266 1,794 0 26,317 Malaysia 0 77,592 0 72,123 Thailand 12,821 0 0 32,460 Total of Above 56,719 80,472 11,354 145,255 -------------------- (percentage shate) --------------------- 41.3 58.7 7.3 92.8 Source: International Tin Council, Monthly Statistical Bulletin, various issues. ' February 1981 11-13 References 1. International Tin Council, Tin Production and Investment (London 1979). 2. K.F.G. Hasking, The Search for Deposits From Which Tin Can be Profitably Recovered Now and in the Forseeable Future , Fourth World Conference on Tin, Vol. 1, International Tin Council, 1974. 3. World Bank, Price Prospects for Major Primary Commodities, 814/80. 4. J. Chhabra, E. Grilli and P. Pollak, The World Tin Economy: An Econometric Analysis, World Bank Staff Commodity Paper No. 1, June 1978. 5. World Bank, Burma; Appraisal of the Tin and Tungsten Expansion Project, IBRD Report Vo. 1351-BA, 1977. 6. International Tin Council, Monthly Statistical Bulletin, various issues (London, International Tin Council). 7. Metallgesellschaft, Metal Statistics, various issues. Metallgesellschaft AG, Frankfurt am Main, 1978. * February 1981 III-1 0 III. THE STRUCTURE OF THE INDUSTRY A. The Degree of Integration; Control 1. Most production and marketing of tin is still in private hands, even if government intervention in production is considerable in Indonesia and Bolivia. Direct government role in marketing is only a relatively recent phe- nomenon. The two largest tin mining companies of the world are the state mining companies, P.M. Timah in Indonesia and Corporation Minera de Aolivia (COMIBOL) in Bolivia. The London Tin Corp. Ltd., the largest international privately funded tin mining group, has interests in Malaysia, Nigeria and Thailand. 2. Traditionally the majority of the dredges in Malaysia were owned and operated by public limited companies, many of which were London-based. In 1976/77 a general reorganization of the management took place which resulted in setting up of the Malaysian Mining Corporation - a joint venture between Pernas Securities and Charter Consolidated Ltd. The reorganization was carried out through the purchase by Pernas Securities of the London Tin Corporation, which managed nine Malaysian tin producing companies in which it also had par- tial shareholdings, while Charter Consolidated Ltd. brought in four Malaysian companies in which they also had partial shareholdings. The Malaysian Mining Corporation has now under its management 13 major tin mining companies which together own 38 dredges and produce approximately 70% of the dredging sector's output, equivalent to 27% of total Malaysian production. 3. Theie are four companies engaged in tin mining in Indonesia: P.T. Timah, a government owned corporation which accounts for about 90% of current production; Koha Tin, which is a joint venture between P.T. Timah and Kajura Mining Co. of Australia; RITIN, which is a joint venture between P.T. Timah and the Bidliton Corp. of Netherlands and Broken Mill Pty. Indonesia Ltd. February 1981 111-2 4. In Bolivia the mining industry is made up of three sectors; the large nationalized mites under the control of COMIBOL - accounting for about 70% of Bolivia's production, the medium mines which are privately owned enter- prises with about 21% of total production and the small mines and cooperatives which are generally individuals on a very small scale with only about 9% of Bolivia's production. 5. In Thailand the traditional methods of mining vere onshore and off- shore dredging, plus open cast using gravel pumps. In recent years a system of offshore mining has been developed which uses converted fishing boats as small suction dredges. The very large increases in production in 1977 and 1978 can be attributed to these units. Offshore dredges and suction boats account for about 47% of Thailand's production. There are four major companies engaged in offshore dredging. Offshore Mining Organization - a wholly state owned company - was established in 1975. It also hires twelve dredges from eleven local companies for operations on their offshore leases. 6. In UK the major companies are: South Crofty with 55% of production, Geever with about 24% of UKs production in 1978 and Wheal Jane. 7. In Australia tin mining has been carried out in all the states and in the Northern Territory. In recent years Tasmania has come to account for 50% of production, where Revision Mine is now the largest single producing unit in the world. The rest comes from Queensland, New South Wales and western Australia. B. Production and Trade Arrangements in Force 8. World Tin production has fluctuated widely. The peak of world pro- duction was reached in 1941, but already in 1942 production was curtailed drastically. The recovery of the tin industry after World Ware II lasted until the early 1950s. During the war, the USA had stockpiled tin. The Korean war 10 February 1981 111-3 led to further stockpiling in 1950 and 1951. In mid-1954, the target for stockpile was increased. In 1961 a large surplus situation materialized. This surplus was augmented in 1957-61 by large exports from the USSR and China. To prevent a weakening of the market tin producere cut back mine production sharply. As a result, mine production lagged behind current consumption when the USSR stopped its sales of tin in the early 1960s. The United States alle- viated the ensuing shortage of tin through sales from its stockpile. It was not until the late 1960s that the balance between production and consumption was restored. From then on, total production has grown at a very modest rate. The failure of mine production to adjust quickly to changes in market demand was the main determinent of the relatively large price fluctuations experienced by tin. Between 1955 and 1978, the average annual change in the real price of tin was 10.2%. In an attempt to dampen these fluctuations and to ensure a smoother demand-supply adjustment, tin producers and consumers entered into va.-ious market price stabilization agreements in the post-World War II period. C. The International Tin Agreements 9. The first five-year International Tin Agreement (ITA) became opera- tional in 1956, the Fifth Agreement came into force for five years on July 1, 1976 and will expire in June 1981. 1/ The main objectives of all the agree- ments were stabilization of prices, fostering the growth of the tin industry, further expansion in the use of tin, expansion of indigenous processing of tin and the development of the tin markct in the developing producing countries. 10. The agreements were administered by an International Tin Council (ITC), which also managed the buffer stock set up to stabilize market prices within a predetermined, but flexible band. The price ranges between a floor and a ceiling price which is in turn divided into three sectors; the lower and upper sector of the range defines the area within which the buffer stock manager is 1/ The International Tin Council has decided to extend the Fifth ITA for a year, as the Sixth ITA is under negotiation. February 1981 111-4 authorized to buy and sell in order to prevent the market price from falling and rising too steeply, and a middle sector, in which he may operate only on special authority from the Tin Council. When funds for protecting the floor price are deemed insufficient, the Council has the authority to introduce export controls to restrict supplies. The Council determines the quantities of tin that may be exported from producing countries during an export control period. 11. The size of the tin buffer stock under the First ITA was 25,000 metric tons equivalent and 20,000 metric tons under the following three agree- ments. The Fifth ITA which entered into force on July 1, 1976 envisaged a buffer stock of 40,000 metric tons of tin. The producers were under binding obligation to contribute the equivalent of 20,000 metric tons of tin; another 20,000 tons was supposed to come from consumer's voluntary contributions. Several consumers contributed in cash. The United States las not a member of the first four Tin Agreements, but has become one of the Fifth ITA. In October 1980 it contributed 1,500 metric tons of tin metal to the buffer stock. In the first three agreements the buffer stock manager had authority to buy, but not sell, when the market price was in the lower sector, and to sell, but not buy, tin in the upper sector. The Fourth and Fifth Agreements provided him with the authority to operate in either the lower or upper sectors with the proviso that in the lower sector he should be a net buyer and in the upper a net seller. Since the inception of the First Agreement in 1956, the Council has changed the floor and ceiling prices 20 times (see Table 10). Ex- port controls were imposed during the periods 1958-60, 1968-69, 1973 and in 1975-76 for a total of 33 1/2 consecutive months during the First Agreement, 12 1/3 months during the Third and 22 months during the Fourth Agreement. 12. The various ITAs were better able to defend floor prices, with the -dditional help of export controls at times of low demand, than to defend the ceiling price at times of strong demand. While market prices fell below the floor only briefly in 1958, they broke through the ceiling in 1961, 1963-65, 1973-74 and 1977, and during most of 1980. February 1981 III-5 Table II-1: PRICE RANGES IN THE TIN AGREEMENTS Floor Sector _ Coiling Period of operation Unit rice Lower Middle Upper price 1 Juiy 1956- 22 Mar. 1957 E,long ton 640 640-720 720 -800 800-880 880 22 Mar 1957- 12 Jan 1962 730 730-780 780-830 830-880 680 12 J3n 1962- 4 Dec 1963 790 790-850 850-910 910-965 965 4 Ce: 1963- 12 Nov 1964 850 850-900 900-950 950-1000 1000 12 No 1964- 6J,Iy 1966 1000 1000-1050 1050-1150 1150-1200 1200 6 JuY 1966- 22 Nov 1967 1100 1100--1200 1200-1300 1300-1400 1400 22 Nov 1967- 16 Jan. 1968 1283 1283-1400 1400-1516 1516-1633 1633 16 J3 1968- 2 Jan 1970 1280 1280 1400 1400-1515 1515-1630 1630 2 xJn 1970 -21 Oct 1970 ronne 1260 1260-1380 1380-1490 1490-1605 1605 21 Oct 1370- 4 July 1972 1350 1350-1460 1460- 1540 1540-1650 1650 * 1972- 21 Sept 1973 M$pikul 583 583-633 633 668 668-718 718 1S.O: 373- 30 May 1974 635 635-675 675-720 720-760 760 v174-31 Jan 1975 850 850-940 940-1010 1010-1050 1050 31 Jan 1975- 12 Mar 1976 900 900-980 980 -1040 1040-1100 1100 1 Mar 1976 - 7 May 1976 950 950 -1000 1000- 1050 1so-1100 1100 1'j, 1976- 9 Dec 1976 1000 1000-1065 1065 -1135 1135 -12C0 1200 Ci De 1976- 15 juv 1977 1075 1075 7)50 1150- 1250 1250 -1325 1325 S 1977 14 Jily 1978 1200 1200-1300 1300 1400 1400 -1500 1500 -198 20 July 19'9 1350 1350 1450 1450 1600 1600-1700 1700 20 1979 13 Var 1980 1500 1500 - 1650 1650-1800 1800-1950 1950 13 Mar 1980 1650 1650-1815 1815 1980 1980-2145 2145 Source: International Tin Council: Monthly Statistical Bulletin February 1981 111-6 13. Sales from the US strategic stockpile were to a considerable extent used by the US Government to cut market peaks, 1/ when prices exceeded the ceiling, as in 1964-66 and 1973-74. By June 1978 the GSA had disposed of 148,214 long tons of tin since disposals began in 1962. A disposal program of another 30,000 tons of tin crme into effect on July 1, 1980. 1/ A comprehensive analysis of the US in stockpile action can be found in J. Phanguangdee's Analysis of the United States Tin Disposals, unpublished M.A. Dissertation, Thammasat University, Bangkok, 1975. 1ebruary 1981 111-7 References 1. International Tin Council, Tin Production and Investment (International Tin Council, London, 1979). 2. H.Y. Yip, The Development of the Tin Mining Industry in Malaya, University of Malaya Press, Kuala Lumpur, 1969. 3. W. Fox, jin: The Working of a Commodity Agreement, Mining Journal Books Ltd., London, 1974. 4. T. Geer, The Post-War Tin Agreements, Scheizerische Zeitschrift Fur Volkswirtshaft und Statistik, No. 2, 1970. 5. G.W. Smith and G.R. Schink, The International Tin Agreement: a Reassessment (The Economic Journal, 86, 1976). 6. J. Phangmuangdee, Analysis of the United States Tin Disposals, unpublished M.A. dissertation, Thammasat University, Bangkok, 1975. 7. International Tin Council, The Tin Agreements in Operation, 1956-79, ITC/718.6 (International Tin Council, London). February 1981 IV-1 IV. ECONOKIC PARAMETERS USED IN THE MARKET ANALYSES OF THE INDUSTRY A. Supply Elasticities 1. The diversity in production methods, industry structure and degree of government controls that exists in the various producing countries makes any general hypothesis about the behaviour of tin producers very tentative. Econometrically estimated supply equations, 1/ which are the basis for the price elasticities shown in Table 11 rest on two major assumptions: (i) Tin producers are assumed to adjust their output in response to changes in market prices and mining cpsts. The prices utilized are international market pri(es of tin, such as those quoted at the London Metal Exchange, deflated by an index of mining costs which considers the costs of fuel, machinery, and labor. The weights of these cost components differ from country to country reflecting the different relative shares of fuel, capi- tal equipment and labor in total costs. Since the structure of tin mining costs depends largely on the method of mining (dredging, gravel pumping, open cast mining, etc.) weights have to be derived for the various production modes and then averaged on the basis of the relative importance of the various types of tin production in each country. The econometric results indicate an average time lag of two to three years in the response of supply to price changes. 1/ See J. Chhabra, E. Grilli and P. Pollak, The World Tin Economy: An Econometric Analysis, World Bank Staff Commodity Paper No. 1, June 1978. rebruary 1981 IV-2 Table IV-1: TIN DEMAND ELASTICITIES Country or Price Elasticity of Demand Area Short-term /a Long-Term United States Tinplate users 0.2* n.a. Non-tinplate users 0.13 n.a. Western Europe Tinplate users 0.11 n.a. Non-tinplate users 0.30* 0.41 Japan Tinplate users 0.18 n.a. Non-tinplate users 0.49* n.a. Other Developed Countries 0.37 1.60 Developing Countries 0.11 0.15 *Significant at the 95 percent confidence level. /a The elasticities were estimated at the means of pro- duction and price. Source: J. Chhabra, E. Grilli, P. Pollak: An Econometric Analysis, World Bank Staff Commodity Paper No. 1, June 1978. * February 1981 IV-3 (ii) It was further assumed that the bulk of tin produ- cers adjust their production to meet the global ex- port goals set by the International Tin Council whenever necessary. 2. In addition to prices, costs and production targets, a host of other factors like a country's labor situation, goverAment policies, the availability of credit, and taxation, etc. influence tin supply. The impact of these fac- tors could not be taken into account because of lack of consistent information. 3. The lag with which supply reacts to real price changes varies among producers: Malaysia, Thailand and the small producers (lumped together in "Rest of the World") respond to price changes with a one year 1, ;; Bolivia, Indonesia and the developed producers with a three year lag. Short-term price elasticities of supply range from 0.2 for Indonesia to 1.1 for the small produ- cers: the weighted average - that closely approximates the world supply elasticity - is 0.42. Long-term price elasticities range from 0.7 to 2.09. The weighted average is 1.07. B. Demand Elasticities 4. The econometrically estimated price elasticities of demand also rest on the assumption that the response of tin users to changes in tin prices will extend over several periods. Various institutional and technological rigidi- ties prevent a rapid adjustment of the demand for tin to changes in both pri- ces and demand for final products. Institutional rigidities have to do with the market structure of the final products, while technical constraints stem from the fact that production processes are difficult to change in the short term. The tin demand equations that form the basis of the price elasticity estimates incorporate a partial adjustment process. Yebruary 1981 IV4 Table IV-2: TIN SUPPLY ELASTICITIES Country or Price Elasticity of Supply Area Short-term ja Long-term Malaysia 0.31* 0.70* Indonesia 0.21 0.90 Thailand 0.60* 1.25* Bolivia 0.24* 1.34* Developed Countries 0.30* 0.70* Rest of the World 1.11* 2.09* *Significant at the 95 percent confidence level. /a The elasticities were estimated at the means of pro- duction and prices. Source: J. Chhabra, E. Grilli, P. Pollak: The World Tin Economy: An Econometric Analysis, World Bank Staff Commodity Paper No. 1, June 1978. * February 1981 IV-5 5. The estimated price elasticities of demand are summarized in Table 12. The values fall within a fairly narrow range - from -0.1 to -0.5, supporting the a priort motion that the demand for tin is highly price- elastic in the short term. The long-term elasticities vary widely and it is, therefore, difficult to draw any conclusions. C. Institutional lar"t Structures Affecting Prices 6. The structure of the tin industry makes it difficult for tin producers or smelters to sell directly to the end users of tin. Tin traders play the role of getting tin metal from producers to consumers. In recent years there had been a shift of smelting from industrialized countries to the producing countries. That has increased the importance of traders. 7. Like other metals it is difficult to establish fixed producer prices for tin. Although a large part of world tin metal production is concentrated * ii only five or six main smelters, the largest two tin smelters, situated in Malaysia and smelting some 45% of world tin production (excluding the centrally planned economies), are smelters without their own mine production and their own marketing organizations to sell their metal directly to tin users. Most of their concentrates are bought from non-associated mining companies on a spot basis, and most of their production is sold daily to traders on the Penang market. 8. A substantial part of world supply and demand is centralized in three places: Penang, London and New York. 9. The Penang market is a physical market, operated exclusively by the two Malaysian smelters, where production of tin-in-concentrates of the miners in Malaysia and some other sources is daily matched with offers to buy tin metal from the world trade. No forward transactions are possible. There is no possibility of hedging transactions - and in that sense it is not a February 1981 IV-6 speculative market. It is a purely physical market, where the only sellers are the miners, and the only buyers are traders and consumers of tin metal. 10. The London Metal Exchange is a free and open market. It not only has physical trade in tin, but also paper transactions, which can serve both for hedging purposes on behalf of tin traders and consumers and for specula- tion. On the LHE, tin is bought and sold in 5 ton lots, calling for delivery the next day (cash) or any succeeding market day up to three months (forward). For many years the "standard tin" contract (minimum 99.75% Sn) has been the sole basis of tin dealirgs. The LHE maintains its role as the leading ter- minal market for tin, providing hedging opportunities for producing and con- suming industries. 11. The New York tin market is not a market in the strict sense of the word. The prices at which they are willing to sell various deliveries, is from spot delivery to one, two, three or more months forward. 12. There is a degree of correlation between the prices of the Penang market, the LME and New York (Table 13), allowing for freight, insurance financing duiing sailing time and other costs and, of course, differences in the quality of the metal. Differences in parity between markets may occur due to differences in demand for the different grades of tin, and other tech- nical factors. * February 1981 IV-7 Table IV-3: TIN PRICES Penang Price /1 LONDON METAL EXCHANGE /2 NEW YORK MARKET /3 Year M6/Pikul US$/Metric Ton US$/Metric Ton US$/Metric Ton 1950 366.92 1,983 2,055 2,106 1951 526.58 2,846 2,976 2,802 1952 480.08 2,594 2,658 2,656 1953 363.92 1,947 2,014 2,113 1954 353.59 1,911 1,981 2,025 1955 365.50 1,975 2,044 2,089 1956 387.03 2,091 2,171 2,236 1957 373.19 2.017 2,080 2,122 1958 369.35 1,996 2,026 2,097 1959 396.94 2,145 2,164 2,250 1960 393.68 2,127 2,196 2,236 1961 446.85 2,415 2,447 2,498 1962 447.79 2,420 2,471 2,528 1963 455.40 2,461 2,507 2,572 1964 619.42 3,347 3,408 3,474 1965 702.80 3,798 3,893 3,929 1966 645.23 3,487 3,574 3,617 1967 600.10 3,243 3,331 3,383 . 1968 565.54 3,056 3,126 3,266 1969 626.10 3,383 3,428 3,627 1970 664.77 3,592 3,673 3,841 1971 631.70 3,413 3,501 3,689 1972 626.80 3,387 3,770 3,913 1973 686.28 4,720 4,828 5,016 1974 1,136.63 7,844 8,201 8,736 1975 963.79 6,692 6,870 7,492 1976 1,146.56 7,472 7,582 8,373 1977 1,588.03 10,713 10,762 11,786 1978 1,743.19 12,515 12,908 13,880 1979 1,963.65 14,822 15,458 15,702 1980 2,159.40 16,437 16,745 18,651 /1 Penang straits ex-works. /2 Standard, minimum 99.75%, settlement price. /3 Pig, straits, ex-dock, major US port, duty paid. Source: International Tin Council, Monthly Statistical Bulletin, various issues. february 1981 IV-8 References 1. Jasbir Chhabra, Enzo Grilli and Peter Pollak, The World Tin Economy: An Econometric Analysis (IBRD, Staff Commodity Paper No. 1, 1978). 2. C.A.J. Herkstroeter, Some Aspects of the Marketing of Tin, the Tin Price, and the Role of the London Metal Exchange, the Penang Market and the United States Market in Establishing World Market Prices for Tin, in the Fourth World Conference on Tin, Kuala Lumpur, 1974 (Inte-national Tin Council, London, 1977-78). 3. Rene, Van Achter, Stabilisation Machinery for the Tin Market, in the International Tin Council Committees, 1972-73 (International Tin Council, London, Misc. No. 40). February 1981 V-1 V. MARKET PRICES 1. As had been mentioned earlier, tin prices are quoted for the three major markets: London Metal Exchange, New York and Penang. Although differ- ences in price quotations 1/ between these three markets occur occasionally, they are usually short-lived. 2. From 1948 to 1955 production was running ahead of consumption. The Korean war stimulated heavy buying with steeply rising prices. The US Govern- ment suspended purchases in 1951-52 but resumed later. The surplus was absorbed by the purchases of the US Government for the strategic stockpile which virtually ceased in 1955. The amount of stockpiled tin in the USA was equivalent to 2 1/2 years of the average world consumption for 1951-55. After a 1951 peak, prices in the market had moved downwards, steadying in 1952 and falling steeply in 1953. Prices were stable between 1954-56. The tin industry's difficulties in 1956-60 occurred in a general world climate of sluggish prices for commodities. From 1957-1960 the USSR and China exported a great amount of tin. In 1957 export controls were imposed by the Council, thus restricting exports to the market and limiting stocks held in producing countries. For five years the movement in the average price was small, except for a shortened breach of the floor price that had occurred in 1958. 3. In 1961 the tin industry had achieved a new basis of potentiality for growth. The reasons for this growth were: (i) the level of consumption that had been achieved; (ii) the elimination of export controls; (iii) the ending of USSR exports. Growth of demand in 1960 and 1961 enabled the market to relieve the buffer stock manager of all his tin holdings in 1961. The tin mining industry, after the depressed conditions of 1957 to 1959, was faced with a need to expand production to meet the growing requirements of consumers. 1/ Adjusted for transfer cost (transport cost, commissions and taxes, etc.). February 1981 V-2 The market price in 1961 moved above the ceiling price. From 1962 to 1972 the total disposals by the GSA amounted to 98,000 long tons - the larger part was sold between 1963 to 1966. The trend of market prices during the period 1961 to 1972 was generally upward but marked by short-term and medium-term fluctuations. In the early sixties production was at a low level due to tech- neal problems in bolivia, Indonesia and Zaire. The GSA disposals had been filling the gap. The prices in Penang were more stable than in London due to fluctuations in the sterling exchange rate. 4. There was a strong rising trend in most commodity prices in 1973 (Table 14). There was rapid growth in the rate of inflation. A peculiar fea- ture of the late 1973-74 price boom for tin was the sales of tin by the GSA. In 1973-74 consumption of tin for the manufacture of tinplate increased. The reacons for high prices were: high growth of demand, partially speculative; depreciating value of currencies and economic and political uncertainties from the increased prices of petroleum. GSA sold 19,000 tons of tin in 1973. The sales continued in 1974. Prices began to fall only in late 1974, despite the additional 23,000 tons of tin sold during the year by GSA. The buffer stock bought heavily in 1975, but finally export controls were imposed in 1975 and were not lifted until June 1976. Tin became tight due to restraints on ex- ports and heavy buying by the buffer stock manager. The prices went up steeply for most of 1976 despite the moderating influence of large net selling opera- tions of the buffer stock. Due to deficit and no tin in buffer stock, prices in 1977 went up sharply and went through the ceiling (though they increased a couple of times), and stayed there for 1978, 1979 and most of 1980. The price range was increased four times in the period July 1977 and Varch 1980 (see Chart 2). 5. The price of tin in London, which had remained above $17.00/Kg in the first three quarters of 1980, declined steadily during the fourth quarter. The price averaged $14.71/Kg in December 1980 and further weakened in January 1981. *February 1981 V-3 6. The main factors responsible for the recent steady fall in the price appear to be the following: (a) market economies' production increased by 2% in 1980 in the face of unchanged consumption. The market balance eased, especially in the last quarter of 1980; Cb) the US decision to release 30,000 tons from the GSA stockpile over a 3-year period became effective July 1, 1980. Although actual releases by January 1981 did not amount to more than 50 tons, the US Government has used 1,500 tons as its contribution (in kind) to the International Tin Council's buffer stock in lieu of dollar funds. All this has had at least a psychological effect on the market; and (c) the continued high interest rate' in the US, and the 'resultant' fall in ghe precious metal market also took out the speculative support for the price of tin. 7. Generally, tin prices respond to the underlying supply/demand picture - as shown by the strong statistical relevance of stock variables in ecnnometri- cally estimated price equations - to inflation and to changes in expectations. The price determination mechanism is by and large what one would expect in a free market. Speculation seems to play a role in this market, but usually a relatively short-term one. February 1981 v4 Table V-1: TIN PRICES Price -A Export Unit Value Lb Current $ 1977 constant dollars Developing Countries Current $ Actual 1955 2.04 .925 5.62 2.55 1956 2.17 .984 5.83 2.65 1957 2.08 .943 5.35 2.42 1958 2.03 .919 4.94 2.24 1959 2.16 .981 5.52 2.51 1960 2.20 .996 5.50 2.49 2,120 1961 2.45 1.11 6.11 2.77 2,283 1962 2.47 1.12 6.24 2.83 2,422 1963 2.49 1.13 6.23 2.83 2,385 1964 3.42 1.55 8.42 3.82 3,254 1965 3.90 1.77 9.35 4.24 3,804 1966 3.57 1.62 8.40 3.81 3,510 1967 3.33 1.51 7.73 3.50 3,205 1968 3.13 1.42 7.75 3.51 2,998 1969 3.42 1.55 8.42 3.82 3,407 1970 3.68 1.67 8.20 3.72 3,649 1971 3.51 1.59 7.22 3.27 3,472 1972 3.77 1.71 7.05 3.20 3,691 1973 4.83 2.19 7.57 3.43 4,605 1974 8.20 3.72 10.37 4.70 7,574 1975 6.87 3.12 7.59 3.45 6,119 1976 7.58 3.44 8.23 3.74 7,314 1977 10.76 4.86 10.76 4.88 10,003 1978 12.91 5.85 10.91 4.95 1979 15.66 7.01 11.41 5.17 1980 16.78 7.61 11.01 4.99 /a LME settlement price, standard grade. /b Tin Metal Sources: Engineering and Mining Journal; International Tin Council, Tin Statistics, various issues; UN Yearbook of International Trade Statistics, various issues. . 園園昭→句嫡■田国■■国■ト月口田■月日■申■目■日柳昭国■園昭園国国目田国引日国国■り園日目日日．日国咽■－咽旬■国自■国馴■国国．●．-．り園園曲d－昭国ト●－叫園口．－日園月－.----－■■国■国■■，. --,-．ナ門■－..-－→．日国国国国国国国口園国日国日国日，田国園．喝国国国加 受－とM加aワ1始1 て……＿－・丁】・・…v-s 二1_:.= ●二＝==========＝二＝一で－二－てプー－一’-．て’-.：て＝＝了－て了＝==-－了て ：二 ……一－・―一一ーーーー一ーーーー一ー一ーー＿＿品ニー二 February 1981 V-6 References 1. World Bank, Price Prospects for Major Primary Comodities- (IBRD, 814/80). 2. Jwbir Chhabra, Enzo Grilli and Peter Pollak, The World Tin Economy: An Econometric AnalXsis (IRRD Commodity Paper No. 1, 1978). 3. International Tin Council, The Tin Agreements In Operation, 1956-79. ITC/718.6 (International Tin Council. London. 4. H.W. Allen, Accent on Price, ITC/761, 1980, International Tin Council, London. * February 1981 VI-1 VI: SPECIAL ISSUES A. Competition from Substitutes 1. From the user's point of view, tin is a high-cost material, so that the technical advantages gained in a particular application must offset the additional cost involved in its use. I/ Because of its many uses, tin faces competition from a variety of products, but aluminum remains the single most important substitute. Aluminum and tin - free steel - are increasingly replacing tinplate in cans. The manufacture particularly in the USA - of beer - and other beverage cans made from so-called "tin-free steel" rather than tinplate is becoming a threat to tin. Other substitutes for tinplate in- clude glass, paper and plastics. Although satisfactory substitutes for tin in solders have not yet been found, aluminum alloys and other copper-based alloys and plastics can be substituted for bronze. Low-tin aluminum, copper and lead- base bearing alloys may also be usei instead of white metals. 2/ There has been an almost complete substitut *n of tin by aluminum for making collapsible tubes, foil and sheet. B. Sixth International Tin A2reement 2. With negotiations for the Sixth International Tin Agreement having broken down twice, a one-year extension of the existing Fifth Agreement beyond June 1981 has been decided by the ITC. At the first session in April/May 1980, there were disagreements mainly between the JS, on the one hand, and producer countries, on the other, regarding (a) the size of the buffer stock and (b) the role of export controls. The US wanted a large buffer stock of 60 to 70 thou- sand tons, and no export controls. The producers wanted only a small buffer 1/ Robins, D.A.; Technological Developments in Tin Consumption Combat Substitution, Paper presented at the International Tin Symposium, La Paz, Bolivia, November 1977. 2/ See K.L. Harris, "Tin," in Minerals Facts and Problems, 1975 ed, United States Department of Interior, Washington, D.C., Government Printing Office, 1976. February 1981 VI-2 stock of 60 to 70 thousand tons, and no export controls. The producers wanted only a small buffer stock with export controls. At the second ses- sion held in Geneva in December 1980, the chairman of the negotiating conference presented a compromise proposal. The main elemants were (a) a 30,000 ton buffer stock to be financed by all the participating governments with an additional buffer stock of 20,000 tons to be financed through com- mercial borrowing; and (b) export control to provide for the possibility of the ITC deciding to apply export controls by a two-thirds majority vote when the buffer stock reaches 35,000 tons, and by a simple distributed majority when it reaches 40,000 tons. No agreement reached on these arrange- ments. The conference is to be reconvened in March 1981. February 1981 vI-3 Table VI-1: CONVERSION FACTORS 1 Metric ton - 1,000 Kg. - 2,204.622 lb. - 16.534665 Malaysian pikuls. 1 Long ton - 1.016 Kg. - 2,240 lb. 1 lb. - 0.4536 Kg. 1 Malaysian pikul - 60.48 Kg. - 133.33 lb. Long ton to metric ton - 1.016047 Metric ton to long ton - 0.984206 Metric ton to pikul - 16.534665 Pikul to Metric ton - 0.060479 Source: International Tin Council, Monthly Statistical Bulletin * February 1981 vI-4 0 References 1. D.A. Robins, Technological Developments in Tin Consumption to Combat Substitution. Paper presented at the International Tin Symposium, La Paz, Bolivia, November 1977. 2. K.L. Harris, Tin in Mineral Facts and Problems, 1975 ed., United States Department of Interior, Washington, D.C., Government Printing Office, 1976. 3. International Tin Council, Report of the Tin Market, No. 24. Tin Council Fo. 305 (International Tin Council, London, 1980).