Metals are tied in, like every other sector, to the global economy via a variety of exchange rate mechanisms, and metal prices change as stock markets fluctuate. Exchange rate fluctuations affect metal prices profoundly.

The prices of individual metals, like prices for any commodity, are essentially determined by supply and demand.

Current prices do not only factor in immediate supply and demand but also expectations of future supply and demand. In general, the less information available, the greater price volatility will be.

Tin is a silvery, malleable metal mainly used in the production of solder and to coat other metals to prevent corrosion. The biggest producers of tin are China, Malaysia, Indonesia, Peru, Thailand, Bolivia and Myanmar.

Because China is the world’s largest tin consumer and supplier, activity in China can affect tin prices. In recent years, the Chinese economy has slowed from its torrid pace of growth over the previous 15 to 20 years.

As a result, China’s appetite for a variety of base metals has waned. For tin prices to perform well, the Chinese economy will need to accelerate its growth rate.

Another factor impacting tin in China is the country’s increasing environmental awareness. Poor air quality in China has forced the government to take a harder look at the mining industry as a contributor to pollution.

Tin occurs in cassiterite ore bodies, and breaking down these ore bodies to extract the metal expends energy. Producing tin requires ample supplies of coal, electricity and crude oil.

Mines and blast furnaces utilise energy to extract tin ores from the ground and process it into tin. These costs can have a big effect on primary production. Similarly, the costs of scrap metal can impact the price of secondary production.

Investing in tin is a way to bet on a weak US dollar and higher inflation. Tin is priced in US dollars, so the performance of the American economy can impact its price.

The US Federal Reserve Bank has kept interest rates low and the US dollar weak for many years. US central bankers are likely to continue these policies to support consumer borrowing and spending.

These conditions are likely to be very beneficial for commodity and base metal prices. A weak dollar could stoke inflation concerns. There is a limited supply of tin, and producing it is an energy-intensive endeavour. The price of the commodity would likely benefit from fears of inflation.

At Kwanji our team of experts are ready to help your business get the best deal on foreign exchange rates despite volatile market conditions.

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