Tin Production — A Classic Case Of Limits To Growth

The tin production story is out there is in plain sight, but only those directly involved in supplying the tin ore, refining it, consuming tin metal or trading commodities are paying any attention. Bloomberg's Bear Market in Tin Ending as Shortages Mean PT Timah’s Profit Advances 55% explains what's going on now, and what's been going on for years now—

Erfandi’s fleet of bamboo rafts are dredging 33 percent less tin ore from the rivers of Indonesia's Bangka Island than in 2008, as miners fail to keep pace with consumption that jumped 14 percent in two years.

The vessels operating in the world’s largest exporting nation are hauling up no more than 40 kilograms (88 pounds) of ore daily, from 60 kilograms, as reserves get depleted, said the 46-year-old foreman. Miners from China to Peru are also struggling to meet demand for the metal, used to solder components in almost all electronic equipment...

The market will be in deficit for the fourth time in five years, Barclays Capital says...

Prices climbed 51 percent to $26,185/ton in the past 12 months on the London Metal Exchange [price chart 2000-present, above]

The market is “critically dependent” on exports from Indonesia, Peru and Bolivia, said Edward Meir, a senior analyst at MF Global Holdings Ltd. in Darien, Connecticut. Output from the two South American nations may drop to a combined 48,000 tons this year from 51,100 in 2010, CRU estimates. Indonesian supply may increase “slightly,” ITRI forecasts.

The average metal content of ore is declining because richer deposits are now exhausted, Mohd. Ajib Anuar, group chief executive officer of Malaysia Smelting Corp., the country’s biggest producer, said in an interview in January. Mining companies are removing twice as much waste as they did two decades ago to get to the ore, he said.

Lest you think this is a temporary dislocation in the tin market, let there be little doubt that tin is supply-constrained and has been for some time. Stuart Burns wrote Tin — Driven By Fundamentals in August, 2010.

Peak Tin

Tin has supply constraints and yet along with all base metals demand has come back relatively strongly last year and this. Consequently, exchange inventories have dropped and the price has risen. Tin has the best fundamental prospects of all the base metals and will be the first to reach a new all-time price high, Stephen Briggs, metals strategist at BNP Paribas is quoted as saying in a Financial Times article.

Briggs went on to say, “World tin mine production peaked as long ago as 2005. A further decline in Indonesia, serious supply constraints elsewhere and only small sources of new supply suggest that mine output will at best be flat in 2010. It may grow by just 4% in 2011, with little further progress in 2012”. Indonesia’s problems do not appear to be getting any better in spite of significant investment in the development of offshore placer deposits, production is not markedly up.

More recently, Michael Montgomery, writing for Tin Investing News, explained what's going on in Tin Prices At Historic Highs on Supply Deficit.

Currently, the price is well above the pre-crash highs of 2008. The driving force behind the rise in value is simply the tight supply of the metal, and the increasing use of tin as a substitute for lead in solder for electronic equipment...

Supply side tightness and a lack of new production will continue to be the drivers of the tin market in 2011. These issues will not be resolved in the short term, and may continue for quite some time.

Indonesia has stated that it plans to cap tin production at 100,000 tonnes, leaving only 10,000 tonnes to grow from the predicted 90,000 output this year. With China capping production as well, supply deficits may continue over the next few years.

Indonesia would not cap production unless they were planning to conserve their depleting reserves to milk them for all they're worth over the long run.

What about the demand side? Bloomberg tells the story—

Solder represents 52 percent of demand and tinplate 17 percent, according to ITRI Ltd., a St. Albans, England-based researcher. The metal is used in electronic goods and a high proportion of electrical appliances, ITRI said.

Tinplate prices rose as much as 15 percent to 20 percent in some countries in the past year, according to H.J. Heinz Co., which sells 1.5 million cans of baked beans every day in the U.K. alone. Each 415-gram (0.9 pound) container uses a third of a gram of tin, the Pittsburgh-based company said in an e-mail.

Global sales of electronic equipment rose 17 percent to $1.85 trillion in 2010 and may gain another 6 percent this year, according to Bannockburn, Illinois-based IPC, an association for suppliers to the industry.

“As long as there’s a circuit board, there will be tin,” said Wu Xiaofeng, an analyst at Shanghai Metals Market, which has more than 400 researchers.

The only thing that will dampen soaring tin prices is a slowdown in demand, but the electronic equipment market is booming. As long as there's a circuit board, there will be tin.

Demand for electronic goods is accelerating. Global sales of mobile-phone handsets will rise about 12 percent to about 1.8 billion units this year, Gartner Inc., a Stamford, Connecticut- based researcher, said in a May report. Shipments of tablet computers will advance 12-fold from 2010 to 2015, IHS iSuppli, an El Segundo, California-based researcher, said in February.

Chinese requirements may rise 6.8 percent to 157,000 tons this year, compared with domestic supply of 155,000 tons, according to Ran Jun, a senior analyst at Antaike Information Development Co., a state-backed research group.

With demand accelerating, production shortfalls are being met by stock withdrawals. Obviously that can not go on forever. Eventually, something's gotta give.  Let's finish up by talking about The Bronze Age. What is bronze?

Near East 3300-1200 BCE
Europe 3200-600 BCE
BCE stands for "before the common era"

The Bronze Age is the 2nd principal period of the three-age-system as proposed in modern times by Christian Jürgensen Thomsen for classifying and studying ancient societies.

A region could be in the Bronze Age either by smelting its own copper and alloying with tin or by trading for bronze from production areas elsewhere. [Bronze Age axes left]

Copper/tin ores are rare, as reflected in the fact that there were no tin bronzes in western Asia before the third millenium BCE. Worldwide, the Bronze Age generally followed the Neolithic, but in some parts of the world, a Copper Age served as a transition from the Neolithic to the Bronze Age. Although the Iron Age generally followed the Bronze age, in some areas such as sub-Saharan Africa, the Iron Age intruded directly on the Neolithic from outside the region.

Bloomberg alludes to the Bronze Age at one point.

Tin is more than 31 times rarer than copper in the earth’s crust and the two metals were combined to make bronze as long as 5,500 years ago, according to the U.S. Geological Survey. This year, global demand may rise 0.5 percent to an all-time high of 366,000 tons, exceeding supply by 6,000 tons, Barclay's Capital estimates. Based on last year’s average price, that would value consumption at almost $7.5 billion.

Although we can not trace the vagaries of tin ore mining and refining over 5,500 years, we can assert with increasing confidence that the world will never produce more tin than it is producing right now. And thus an expansionary phase that started in the Bronze Age is coming to an end.

Our depleting tin ore reserves are a classic example of limits to growth. This might be a good time to start paying attention. Last year was also a good time to pay attention. As was the year before that...

Comments

[Gail]

Another obscure limit to growth:

http://e360.yale.edu/feature/phosphate_a_critical_resource_misused_and_now_running_out/2423/

[Dave Cohen]

I wrote about phosphorus in

Phosphorus In The Age Of Scarcity

http://www.declineoftheempire.com/2010/09/phosphorus-in-the-age-of-scarcity.html

[Bill Hicks]

Great article. How many more of these kinds of stories can we stand? It's become pretty clear that most of the world's vital resources will be depleted or near-depleted by 2050, and yet population growth continues unabated at about 80 million per year. We are collectively speeding into a brick wall at 200 MPH.

[Tony Weddle]

I wish this sort of debate was as prevalent as the energy debate is now. We're getting all sorts of wishful thinking on energy but even if (for the sake of argument; in reality, it can't happen) we could find substitutes for all uses of fossil fuels at meaningful scales and affordability, we'd still hit the wall because of other resource limits, never mind environmental limits.

[Ear Relevant]

If Julian Simon were alive, we could all shout "Nana Nana BooBoo, told you so!" to his face. In the "Simon–Ehrlich wager, a bet he made with ecologist Paul R. Ehrlich. Ehrlich bet that the prices for five metals would increase over a decade, while Simon took the opposite stance. Simon won the bet, as the prices for the metals sharply declined during that decade."

Simon was lucky in the time period chosen, of course, though if he were alive, he'd probably still take the bet and insist that technology and human innovation will deliver all the items we need for perpetual growth.

Speaking of which, nobody knows what exactly what item(s) will be the first to cause limits to growth.

We are already there, really, but what are the immediate limiting factors for more growth? Income inequality resulting in not enough money for the masses to purchase what machines produce is certainly one. It is ironic that at the moment when hard physical limits are setting in, there is still excess capacity in many industries!

Justus von Liebig, well over a century ago popularized the Law of the Minimum, a principle developed in agricultural science by Carl Sprengel (1828). It states that "growth is controlled not by the total amount of resources available, but by the scarcest resource (limiting factor)."

(NOTE: I quoted Wikipedia articles about Julian Simon and Justus von Liebig.)

[John Theodorou]

Speaking of which, nobody knows what exactly what item(s) will be the first to cause limits to growth.

I think it's safe to say that this "item" would be oil. If it weren't then why would everyone, on both sides of the argument, be so intently focussed on the oil peak? It's because with peak oil comes the end of growth. For a species in overshoot it behooves us as individuals to understand its consequences and prepare for this eventuality.

[Nik]

Liebig's law, anyone?

[JC]

Liebig's law? This is interesting. My big question regards what piece of information will wake up the world? As a DOTE reader the answer is "nothing". But, can we look further in our group? If I was to bring peak Tin to my friends, they would laugh and say "Oh yes another doom and gloom problem!"

Is there a way to tie together everything we are witnessing? That is, can we tie together (1) increasingly frequent financial crises, (2) increasingly convincing environmental events consistent with climate change, (3) increasingly hard to find "easy" energy, (3) increasing political corruption, (4) increasing income inequality, (5) increasing civilian deaths due to war and increasing major conflict, (6) etc.?

We can I think add to this list, peak oil, peak phosphorous, peak tin, etc.? Why is it that all of these experiences are occurring all at once is my question. Explaining why may be more convincing to our happy go lucky friends.

My typical experience of the world is for instance peak US oil in the 1970s in isolation, or an isolated financial crisis here and there. I have never heard of so many immediate challenges occurring at once. It occurs to me that this is a "natural phenomenon" and something beyond us. We can blame our politicians/economists but they have always been a fools wise man.

Can anyone bring together all these phenomenon to make it intelligible? Probably not, but the concept of ENTROPY seems to work the best. Anyone who yells about conspiracy, fault, etc. does not I think understand our fate, that is a period of tremendous organization and performance followed by entropy as the energy dissipates. The concern I have is with peak resources, are we at the end of human existence? Is there a scientific rationale for why resources are diminishing all at once in a period of a decade? Pretty amazing I think and not intuitive to those of us who have not studied resource limits.