Reuters reported that investors driving tin prices to record highs risk getting trapped in the market, notorious for its ability to turn huge paper profits into monster losses.

Technically, the bulls are holding all the cards while rains in the tin producing regions of leading exporter Indonesia have added to tin's fundamental appeal in the short term and depleting onshore deposits and rising demand in the long term. But tin is notorious for snaring investors as limited liquidity makes it easy to make paper profits but difficult to convert these to real money.

Mr Dan Major metals analyst at RBS in London said that "In terms of liquidity tin tends to be lower than the other traditional metals. If someone is holding a large position it can be hard to get out of."

In November 2009, Ebullio Capital Management's commodity hedge fund controlled almost 90% of London Metal Exchange tin stocks and cash contracts. By February 2010, assets under management had dropped to USD 1.47 million from USD 42.3 million in November after the fund liquidated parts of its physical book and some long held speculative positions mainly in LME non ferrous metals.

A trader in Singapore said that "Like the old saying goes, those that don't learn from history will be forced to repeat its mistakes. And the one thing I have learned is don't speculate in tin. Unless you play it perfectly, the chances are you will lose your shirt."

(Sourced from Reuters)