Tin: a hidden beneficiary of semiconductor demand

Tin is an important commodity in the universe of our Transition Materials strategy¹. The ancient metal is instrumental in manufacturing semiconductors, solar panels, 5G technologies and electric vehicles (EVs), helping drive a robust demand outlook. 

Tin: an introduction

Tin has been used for thousands of years and is present in various archeological artifacts, including ancient tools, weapons and bronze alloys. It is a silvery-white metal with relatively low melting and boiling points of 231.93°C and 2,586°C. It is soft and malleable, has a relatively low density and resists corrosion. A chemical element, its symbol is Sn and atomic number 50.

FIG 1. Tin: key market characteristics:
 

Sources: U.S. Geological Survey, Mineral Commodity Summaries, January 2023; Roskill, “Tin: Outlook to 2029”, July 2021; Bloomberg, December 2022; WoodMackenzie, “Tin – the forgotten foot soldier of the energy transition”, April 2021.
 

Demand drivers

Traditional sources – comprising 42% of total demand² 
Historically alloyed with copper to make bronze, tin is now mainly used as a coating for other metals to prevent corrosion. These include food and beverage cans – hence the term ‘tin cans’, although they are primarily made of steel – and the metal is also used in the chemicals sector to develop polymer additives, especially PVC³. 

An immense demand driver is the use of tin for solder: for joining circuit boards in semiconductors used in EVs, 5G technologies and consumer electronics, in addition to solder ribbon used to join solar panels.   

However, even for these well-established uses, there are some substitution risks. Tinplate coatings are at high risk of being substituted by aluminium or plastics. The rise of lithium-ion batteries at the expense of lead-acid batteries⁴, for which tin is an important input, presents a moderate risk to demand. In the field of specialty chemicals, tin is at a low risk of being replaced by alternatives like barium-zinc or calcium-zinc, which do not perform as well.

Demand linked to system changes – providing 58% of total demand¹
Going forward, we expect demand for tin to strengthen due to the growing adoption of technologies such as EVs, renewable energy, and robotics, which requires vast amounts of electrical equipment that use tin as the conductive metal. 

The projected global demand growth for tin ranges between the consensus view of 1.1% per annum⁵ to our forecast of 2.8% per annum, with the markets for semiconductors and solders growing at 7% and 3.8% per annum respectively. 

We believe tin does not attract the same level of attention as other transition materials, such as copper or lithium, and is therefore the demand outlook for tin is likely to be currently misunderstood by the market. For instance, it is not included in the International Energy Agency’s analysis of critical transition materials. 

FIG 2. Refined tin demand, kilotonnes

Source: “Roskill Tin: Outlook to 2030 (12th edition)” and “Tin – the forgotten foot soldier of the energy transition.” WoodMackenzie, accessed November 2023. For illustrative purposes only.

However, despite its applications in the technology revolution underway, substitution risks remain. Epoxy resins and lead tin alloys are used to replace pure tin in electronics, albeit with lower performance characteristics, and the miniturisation trend in electronic goods reduces the volumes of the metal needed for each product. Tin is used in lithium-ion batteries, which are increasingly being adopted in favour of lead-acid batteries, but it is not currently clear how completely this offsets the substitution risk⁶.
 

Supply sources 

Primary sources: mined tin
Tin is not an abundant metal and few new mining projects are due to be commissioned, limiting primary supply at 1.2% each year⁷. The main tin-producing countries are China, Indonesia, Myanmar and Peru. Total reserves, which include current and prospective operations, represent 16 years of extraction, with the biggest deposits being in China (23%), Indonesia (16%), Burma (14%), Australia (12%), Brazil (9%) and Bolivia (8%)⁸. 

FIG 3. Mined tin by country
 

Source: “Tin – the forgotten foot soldier of the energy transition.” WoodMackenzie, accessed November 2023. For illustrative purposes only.

 

Secondary sources: recycled tin
As with many other metals, tin can be infinitely recycled while retaining high performance standards. Increased collection and recycling of tin reduces the energy used, emissions generated and waste disposed during the extraction and refining processes. The average volume of recycled tin in use has varied between 30% to 35% over the last decade, with dips generally corresponding with periods when its price was low. Tinplate has the highest collection rates (about 65%), followed by solders in electronics (close to 40%)⁹. Regulations are expected to drive an increase in the use of recycled tin by 2030, resulting in secondary supply being forecast to grow at 7.7% each year until 2030¹⁰.  

Refined tin 
The global production volume of refined tin amounted to 380 kt in 2022¹¹, with China producing more than 50% of this volume, followed by Indonesia (20%), Australia (10%) and Brazil (10%)¹². 
 

LOIM investment conviction

Tin is playing a vital role in the technology revolution. Given our analysis of forecast supply and how changes in the energy and materials systems are driving demand, we currently see the metal as having one of the most positive outlooks among all the transition materials we research.

From a modelling standpoint, global demand is expected to grow from 422kt in 2022 to 525kt by 2030², compared with the consensus forecast of 460kt¹³. This is equivalent to a 2.8% compound annual growth rate (CAGR). At the same time, global supply is expected to lag at a 2.2% CAGR¹⁴. By 2030, this will create an estimated supply deficit of 25%.

FIG 4. Tin: supply-demand outlook to 2030

Sources: Roskill, “Tin: Outlook to 2029, July 2021; Bloomberg, December 2022; “WoodMackenzie, Tin – the forgotten foot soldier of the energy transition”, April 2021; LOIM forecasts . For illustrative purposes only.

In addition to these calculations, we performed a qualitative analysis to better reflect long-term uncertainties. Regarding demand, we estimated that tin could materially benefit from system changes, and demand substitution was currently limited. Meanwhile, risks to supply remained low, with very few new projects due to be commissioned, and we estimated that potential for an increase in tin recycling rates compared to our assumptions was limited. On a global scale, new projects that would increase tin supply are scarce, and we estimate that potential for an increase in tin recycling rates compared to our assumptions are limited – which makes us confident in our long-term forecasts about supply. This underpins our highly positive outlook for tin as a transition material.


FIG 5. Tin: conviction matrix

(*) Estimated on country-level concentration of global production, governance of supplier countries, including environmental aspects.
Source: LOIM calculations at November 2023.
 

Environmental and social considerations

If not properly managed, mining and processing tin ore can have detrimental environmental impacts, including deforestation, soil erosion as well as air and water pollution. The metal itself is generally considered to be non-toxic and has low reactivity. With no known biological role in humans, it is not easily absorbed through the skin. But certain tin compounds can be toxic if ingested or inhaled in large amounts.

Investing directly in tin through commodity markets does not enable an investors to express a view sustainable uses of tin by companies, or engage with them through stewardship activities, but these considerations should still be raised.

Market analysis

Tin is traded on major exchanges around the world, including the London Metals Exchange (LME), the Shanghai Metal Exchange, the Jakarta Futures Exchange and the Indonesia Commodities and Derivatives Exchange. The LME trades a contract on tin ingots that have a minimum purity of 99.85%. Each contract represents 5 tonnes of tin and is quoted in USD¹⁶. 

The price of tin is mostly influenced by: 

• Soldering demand. About 50% of tin use worldwide is for solder
• Chinese supply and demand. China is one of the world’s largest tin consumers and suppliers, making it a major influence on the global price
• Government policies. These can impact prices. For example, Indonesia was once a leading tin exporter, but recently banned shipments to support its domestic smelting industry, affecting global supplies and prices
• The US Dollar. As tin is priced in USD, buying the metal is a way to express a view on USD weakness and high inflation given the limited supply of tin and energy-intensive production
• Global stockpiles. Can be a source of supply or, in periods of inventory building, demand

FIG 6. Tin price, 2009-present

Source: S&P Capital IQ at 9 October 2023. For illustrative purposes only. Past performance is not a guarantee of future results.
 

Conviction statement

• Indispensability. Tin is key to the ongoing technology revolution – a dynamic often overlooked as the market focuses on high-profile transition metals
• Growing demand, shrinking supply. Our analysis indicates that appetite for tin will outpace supply in the years to 2030
• High recyclability. Tin can feature in the rise of circular business models as the economy seeks a net-zero, nature-positive transition

sources.

1 Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document
2 Source: LOIM calculations.
3 “Tracking tin use”. The International Tin Association, accessed November 2023.
4 “Study on the EU's list of Non Critical Raw Materials”. European Commission, accessed November 2023.
5 WoodMackenzie: Tin – the forgotten foot soldier of the energy transition
6 European Commission - Study on the EU's list of Non Critical Raw Materials
7 WoodMackenzie: Tin – the forgotten foot soldier of the energy transition
8 U.S. Geological Survey, Mineral Commodity Summaries, January 2022
9 European Commission - Study on the EU's list of Non Critical Raw Materials
10 “Tin – the forgotten foot soldier of the energy transition.” WoodMackenzie, accessed November 2023.
11 International Tin Association
12 Andrada Mining
13 “Roskill Tin: Outlook to 2030 (12th Edition)” WoodMackenzie.
14 “Tin – the forgotten foot soldier of the energy transition.” WoodMackenzie, accessed November 2023.
15 Based on EU Critical Raw Materials Studies
16 Source: S&P Capital IQ, "LME-Tin 99.85% Cash ($/tonne)"

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