LONDON -- Tin prices at record highs are expected to curb demand by packaging and electronic industries and could discourage the use of the silvery metal in new areas.
Tin, widely used in food packaging and to solder electronic products, hit $24,600 a tonne last week, up 45 percent so far in 2008, as markets worried about supplies from top producers China and Indonesia.
"Everyone is quite worried about what impact the higher price might have on demand," said Manager Peter Kettle at the industry's tin consultancy ITRI.
Solders, joining components in the assembly of electronic products, including computers and mobile phones, account for around 50 percent of global consumption, estimated at around 365,000 tonnes last year.
"It (the high price) is going to kill business ... substitution is going to come in," a physical tin trader said.
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Aluminium and plastics could be used instead in packaging.
High prices could limit usage as would a slowdown in the transition to high tin content lead-free solders and an overall weakness in the electronics sector.
"There isn't any risk of a major switch in the next few years, perhaps in 10, but what it will do probably is to slow the continuing transition from the conventional tin-lead solders to lead-free solders," Kettle said.
The move to lead-free solders has been the strongest growing market for tin in recent years, while global tin usage in all other main applications has been roughly stable since 2004 despite the recent metal price increase.
Currently 60 percent of the electronic solder market is lead free and with higher tin costs it would be difficult to expand the market share much more, Kettle said.
Asian companies account for almost 80 percent of tin used in solders, with China alone representing some 55 percent of world solder business.
TIN PLATE
About 16 percent of worldwide tin usage goes into tinplate and it is the largest market for the metal in Europe at about 20,000 tonnes a year, according to ITRI.
The food and beverage market uses some 66 percent of all tin plate produced in Europe.
"Tin packaging is going to become more of a premium product again, how it used to be 10 years ago before China production reduced costs so dramatically," said Emma Hanson company director at Tinplate Product Ltd.
The U.K. tin product manufacturer said they transferred the higher cost of tin plate onto their clients.
"It does mean that the amount of tin packaging currently used in the market place is likely to be reduced," Hanson said.
Aluminium is one possible alternative for food and packaging, but energy accounts for about one-third of production costs and electricity prices have been on an upward trajectory for some time now.
Aluminium prices have risen by 25 percent since January to around $3,000 a tonne.
Another important market in Europe is wine bottle tops, which account for some 5,000 tonnes of tin a year out of the European market of around 65,000 tonnes, according to ITRI.
"If there is going to be substitution it is going to be in things like wine tops, which have a 100 percent tin content," another physical tin trader said.
In other end-user markets tin usage had already been under pressure due to regulatory changes under the European Union.
"It is a longer term drive by legislators in Europe and America to get heavy metals out of chemicals and stabilisers," ITRI's Kettle said.
However despite the higher prices ITRI expected world consumption growth to be steady at around 3-4 percent this year with world demand forecast at around 370,000 tonnes.
This is up from last year's estimate of tin consumption of 355,000 tonnes, but ITRI said this figure was artificially depressed by one-off de-stocking by some consumers.
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