Myanmar mining ban hits flow of tin concentrates to China

INTERNATIONAL DESK: China’s imports of tin concentrates collapsed in September, reflecting the suspension of mining activity in the semi-autonomous Wa state in neighbouring Myanmar.

The United Wa State Army (UWSA), the largest of Myanmar’s ethnic groups, ordered a halt to all mining and processing activity at the start of August for a wide-ranging audit of the tin sector.

The Wa mines account for more than 70% of production in Myanmar, which is the world’s third largest tin producer and the dominant supplier to China’s smelters.

The ban remains in force and is now starting to constrain the flow of concentrates to China’s smelters.

Chinese producers built up stocks of both raw material and refined tin in anticipation of the halt in activities, and the impact on the supply chain has so far been limited.

It helps that global tin demand is currently tepid due to weakness in the electronics sector, which accounts for around half of all tin consumption in the form of circuit-board soldering.

However, China has had only limited success in diversifying its raw materials supply, meaning the loss of material from Myanmar will become ever more significant the longer the ban lasts.

IMPORT SLUMP
China imported 7,300 metric tons of tin concentrates in September, which was the lowest monthly count since February 2019.

Imports from Myanmar slumped to just 1,421 metric tons after a mini surge over July and August ahead of the mining ban.

What is now entering the country is likely coming from mines outside of Wa territory such as the Mawchi mine in Kayah state and the Heinda mine in the Tanintharyi region of southern Myanmar.

But with the Wa-controlled region of the country accounting for the lion’s share of national output, there is limited offset potential within Myanmar.

Nor has China managed to significantly reduce its dependence on Myanmar for raw materials.

The Democratic Republic of Congo has been the second largest supplier after Myanmar in recent years, and imports rose by 24% year-on-year to 21,600 metric tons in January-September.

However, that’s still a low number relative to the 137,000 metric tons that has flowed over the Myanmar border so far this year.

Chinese buyers have also stepped up purchases from other sources such as Bolivia, Brazil and Russia but volumes have been modest and nowhere near high enough to compensate for the loss of Wa material.

LIMITED IMPACT
The Myanmar ban has to date had little impact on either China’s production of refined tin or the tin price.

China’s smelters lifted output by 5.6% year-on-year to 130,000 metric tons, according to state research house Antaike.

The London Metal Exchange (LME) three-month tin price is currently tracking sideways around the $25,000 per metric ton level, with any Myanmar disruption premium more than offset by high stocks and weak consumer demand.

The boom in tin usage for home electronics during lockdown in 2020-2021 has given way to a prolonged downturn.

Global usage fell by 3.2% last year and is expected to contract a further 1.6% this year as consumers the world over rein back on their purchases of electronic goods, according to the International Tin Association.

LME stocks have risen from a low of 1,510 metric tons in April to a current 7,120. Time-spreads slipped into contango in early August and have remained super-loose ever since, suggesting there is no shortage of available metal.

FOR NOW
The tin supply chain has got lucky in so far as the loss of production from such a major supplier has coincided with a time of market surplus.

There has been no official word on when activity will be allowed to resume at the Wa mines. Tin is a major source of income for the UWSA, which should mitigate against a prolonged stoppage.

However, September’s collapse in Chinese imports from Myanmar shows the mining ban is now starting to bite.

And it is doing so just as demand is showing signs of recovery. World semiconductor sales, a proxy for tin usage in soldering, troughed in the first quarter of 2023 and have since notched up month-on-month gains for six consecutive months.(REUTERS)