PDA

View Full Version : UK Tin market prices



Lion El Jason
06-10-2009, 04:10
I know there's a prices thread somewhere but this is a bit different news.
Dunno where it should go though, please move if you do.

A hedge fund is buying up tin stocks in the UK. It's likely one fund has warrants for 90pc of physical tin stocks.
They are trying to make prices of futures and immediate delivery diverge enough to make a huge profit. Current trends indicate shortages to come.

Obviously tin is a component of pewter and and huge change in metal costs like the ones over the last couple of years (Which tbh GW has done better than other companies at absorbing rather than passing on) may well lead to higher prices for all metal minis.

The original article is here (http://www.telegraph.co.uk/finance/markets/6259436/The-mystery-investor-who-is-turning-the-tin-market-on-its-head.html).

This news has even made Privateer Press employees make comment even though this is a UK tin issue.
The gaming market uses a frankly insignificant amount of tin overall so I doubt this has anything to do with us directly, but the shortages may.

CaliforniaGamer
06-10-2009, 06:27
trying to corner the tin market has to be one of the more hairbrained commodity plays Ive heard of...

if it follows the pattern of the Hunt brothers, it might spike a bit before crashing through the floor (ala silver circa 1980). Of course that doesnt exclude mini companies raising prices under the pretext of tin costs, however disingenuous that might be.

venus_redscar
06-10-2009, 06:45
These scams generally don't work because no one can take over the entire supply.

And GW isn't one of the better dealers with this. Other companies just gave in and went back to partly lead. Warning stupid kids not to eat it...

Brimstone
06-10-2009, 06:58
I've renamed the thread into something a little less provocative.

The Warseer Inquisition

Condottiere
06-10-2009, 08:42
IIRC, the Malaysian government had a try at that once in the early 80s.

http://stocktaleslot.blogspot.com/2008/07/1981-2-malaysian-tin-market-fiasco.html

orlanth1000
06-10-2009, 10:51
Calling Reinholt?.......

Lion El Jason
06-10-2009, 14:00
trying to corner the tin market has to be one of the more hairbrained commodity plays Ive heard of...


I understand they tried it with silver and failed.



And GW isn't one of the better dealers with this. Other companies just gave in and went back to partly lead. Warning stupid kids not to eat it...

Maybe the smaller companies. Privateer had to cut the "Epic" sculpted bases off their range of epic warlocks to save money.
Price rises on their new miniatures were huge (though they left older ranges alone).
Similar can be said about other companies, GW was actually relatively good.

scarletsquig
06-10-2009, 14:38
The tin prices of recent years have been nuts, we've got loads of tin, it's everywhere, not about to run out anytime soon and newly mined tin is constantly being supplied.

The UK even has a load of tin, we stopped mining it because it became too cheap to import, wasn't worth the effort.

But, as usual, if an investor thinks they can make money out of it they will, regardless of the consequences, see the 50% rise in wheat prices that hit Africa really hard a couple of years ago. Yes, some farmers benefitted, the rest of the population didn't fare so well though.

This hedge fund is going to end up with a titanic surplus if it does manage to fix the market.. it might raise prices on some of it's stock, but it's still going to be left with collossal warehouses stacked full of tons of the stuff (along with all the storage costs that that incurs) after that rise has passed. If you look at the logisitics of this idea, it's a bit of a crazy gamble.

Reinholt
06-10-2009, 18:02
My quick view:

The writer of this article is a total <expletive deleted>ing ***** who doesn't know <expletive deleted> about <expletive deleted> when it comes to commodities.

Key points:

1 - If prices are expected to go higher in the future (at a faster rate than your storage costs), you'd have to be a ***** or in a cash crunch to sell now.

Take Space Hulk as an example - let's say the cost of storing a copy of Space Hulk is $1 per month, and I know that as the game gets more rare, the price will rise $10 per month for the next year. Let's say I bought a copy of Space Hulk and decided I didn't want it. Should I sell now or later?

So the line:


The LME seems intent on ignoring the fact that the metal, still in surplus above the world's needs, does indeed appear to be artificially overpriced.

Is totally nonsensical. It's not artificially overpriced even with the evidence in the article (which is incomplete), as it's expected to go EVEN HIGHER next year on increased demand by the article's own admission!

Stupid.

If I can:

- Buy something cheap.
- Store it cheap.
- Sell it really expensive later.

And the writer concludes this means the commodity is overpriced (which, if it were true, would mean when the price went down to "fair" value I'd make an EVEN LARGER profit by executing this strategy) as opposed to underpriced, I can only conclude it's a damn good thing the writer of the article is a writer and not a trader.

2 - The LME was totally transparent about this happening. Everyone knew someone was doing it, and more so, there's a rule that the LME uses (having to lend at what is essentially a zero rate) to prevent cornering the market Hunt brothers style if your position gets big enough. If you had 100% of the spot (current purchase) market for tin, you'd have to lend out your stock to people at zero cost, and they could pay you back with future supply; in short, you can't buy ALL the tin and prevent anyone else from having any. You are required, by the rules of the exchange, to share.

3 - Likewise, if tin prices continue to rise, there is additional supply that could be brought online because it would become profitable to do so. It is true there is a major tin surplus; the issue is that tin is not free to manufacture. I can't just walk down the street and pick up 200 tons of tin and carry it home to sell! You have to mine the <expletive deleted>, and that costs money. If it costs more money than you can make selling tin, you don't do it. Thus, as tin prices go up, less convenient tin to mine becomes more attractive, and more tin shows up on the market.

4 - They do not accurately represent what this hedge fund is betting on. Basically, the bet is thus:

- Tin demand will continue to rise.
- Tin demand may, in fact, rise enough that it will bring other supply online, and thus increase the supply of tin.
- This will drive prices back down to some equilibrium point where tin is more expensive and more is being produced (as if it falls too far, you stop producing again).

Thus, either there is a shortfall in the interim as supply ramps up (sell your tin stockpile for a profit here, playing it out as long as you can before supply comes online), or you bought it so cheap that even at the new equilibrium, you can make a solid profit, which is to say the market was underpricing tin in the first place.

This is not "cornering" the market on tin (there is too much potential supply for that, and you have to share at least some), but rather a bet that the market is underpricing the chance of an economic recovery driving tin demand and/or the view that tin supply will take a while to come online for fundamental reasons and you can profit from the short-term dislocation.

Edit: Before anyone comments, yes, I have simplified things like carrying costs, interest expense, or dividend concerns (not really relevant unless you have some really weird tin on your hands in this case, but still a concern in general when considering forward/future and spot issues) for the sake of both brevity and clarity. If you want the big explanation, google it and be ready to do some math.

grissom2006
06-10-2009, 23:08
The prices of metals globally have been doing wild things due to lack of production so scrape and secondhand metals are raising in price. It never lasts long and once it goes back to normal prices rapidly correct themselves.

Promethius
06-10-2009, 23:52
The issue with tin supply is quite interesting, particularly here down in the south west where we like to dig the stuff up! The cornish tin cartel tried to artificially keep the cost of tin high for many years and failed spectacularly once third-world markets were able to flood the market with tin gained by open-cast methods (which was obviously a lot cheaper than deep 'shaft-and-level' mining). However, those surface deposits are likely to run dry in the next decade or so, which means that deep mining will once again rise to the fore. This will mean (theoretically) a sustained increase in the price of tin per ton. Down at South Crofty, the plan is to get digging now, store the metal in a warehouse and wait for the price to hit the right point. Of course, crofty has been mined to death over the last few hundred years so they are basically trying to create an entirely new mine around the bones of the old ones. Despite their impressive spreadsheets, they probably won't succeed. The tin down here isn't in one massive, easy to get at deposit that supports a single big mining effort, which makes modern methods difficult. However, when generations have been at the same game it's hard to give up on something.

The answer then specifically for this thread is that yes, tin prices will increase which will affect minature costs. however, the price of tin has been increasing for some years now and hasn't pushed up wargames costs that significantly (I tend to believe that most of GWs price rises are less to do with makret trends and more to do with management). The hedge fund will fail though. If the cornish tin cartel failed to achieve their aims, twice, then a hedge fund stands no chance.

Condottiere
07-10-2009, 00:02
If the price of tin does rise, production in South America and Indonesia will probably increase, not to mention China; at which point the price will probably fall again.

If it doesn't Russia and Malaysia have major deposits that they can and are probably very willing to tap.