According to Macquarie Group Limited, tin may extend its advance as supply lags behind demand reducing global stockpiles.

Mr Jim Lennon company analyst said that the metal, used in packaging may gain 17.5% from USD 21,600 per tonne. Tin reached a record USD 25,500 on May 15th 2008, before the global recession cut prices to less than USD 10,000 by December that year.

He said that stockpiles monitored by the London Metal Exchange dropped to 5.6 weeks of global consumption last month from 8.2 weeks in late 2009. The deficit may be 17,000 tonnes this year as solder and plate demand improves compared with a surplus in 2009.

The analyst said that supply may lag behind usage through next year at least. It can be argued that there is 17.5% upside from the level of USD 21,600 per tonne.

The Macquarie said that consumption may grow 15% to 345,500 tonnes this year while output may expand 2% to 328,500 tonnes. Production problems in Indonesia, the world’s biggest supplier had contributed to lower output which should be supportive of prices.

Indonesia’s government said last month that the nation’s tin output may plunge 20% this year after bad weather disrupted mining. Production may drop to about 85,000 tonnes compared with a full year target of 105,000 tonnes. Production last year was also 105,000 tons, according to a Dec. 31 estimate from the ministry.

(Sourced from Bloomberg)