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Melbourne November 2016
The LME &Tin
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Tin on the London Metal Exchange
The LME Tin contract one of the first traded contracts, launched at the inception of the LME in 1877
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LME exchange pricingProviding confidence in both price discovery and standards relating to the underlying metal
The LME price ensures
• Material of an LME registered brand• Stored in an LME approved warehouse• Duty unpaid – no taxes / VAT etc.• Buyer to pay for delivery out of warehouse
Benefits of LME pricing
• Regulated market• Fully transparent electronic market• Traded and tradable real time prices• Precision in hedging• Multiple Broker Execution• Clearing house guarantee in counterparty default
LME Tin contract specifications
Underlying metal
Tin ingots of 99.85% purity (min) conforming to BS EN 610:1996
Lot size 5 tonnes
Prompt dates
Daily: to 3 months Weekly: 3 to 6 months Monthly: 7 to 15 months
Price quotation US dollars per tonne
Tick size (per tonne)
Outright Carries Ring $5.00 $0.01 LMEselect $5.00 $0.01 Inter-office $0.01 $0.01
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15M
LME Tin contract prompt date structureThe LME’s prompt date structure for Tin runs daily for the first 3 months, then weekly until the end of the 6th month and then monthly out to 15 months
Tomorrow 3M
3rd Wednesday
Daily prompt dates: Cash to 3 Months
Weekly prompt dates: Wednesdays , 3 to 6 months
Monthly prompt dates: 3rd Wednesday, 7 to 15 months
Illustration of the three phases of the LME’s prompt date structure
1. Daily 2. Weekly 3. Monthly
6M
3rd Wednesday prompt dates are available in all months
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Volumes by Client Type
Source: LME Research; COTR Open Interest Ratio is for Long + Short + Net Producer/Consumer divided by money manager . Displayed ratio is the average from Jan 2015- Aug 12th 2016Entities are classified at broker discretion according to the primary function of the entity. Entities may be involved in dual business
Positions held by the Tin hedging community outnumber speculators by nearly 60%
39%
31%
16%
8%6%
Total LME 2016
Producer / Merchant /Processor / User
Money Manager
Broker Dealer / IndexTrader
Algo/Prop
Other Reportables
46%
19%
25%
1% 9%
Tin 2015
CME Copper
LME Copper
LME Tin
Open Interest Ratio: Money Manager Positions / Hedging Positions
Speculators Hedging Risk
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Price PerformanceStrong recent Tin performance, second best performer Year-To-Date
0%
5%
10%
15%
20%
25%
30%
35%
$13,000
$15,000
$17,000
$19,000
$21,000
$23,000
$25,000
$27,000
LME Tin 3 Month ($/mt) ATM Volatility
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Stock levelsStocks have dramatically shifted to Asia, In October stocks are their lowest since 2008
0
5
10
15
20
25
30
Thou
sand
s
Europe Americas Asia
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Backwardations to incentivise deliveryTom/Next spread is managed by lending rules in case of a dominant holder
-$50
-$40
-$30
-$20
-$10
$0
$10
$20 Tom/Next
High Low-$300
-$250
-$200
-$150
-$100
-$50
$0
$50
$100 3M- Cash
Con
tang
oBa
ckw
arda
tion
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$12,000
$13,000
$14,000
$15,000
$16,000
$17,000
$18,000
$19,000
$20,000
$21,000
$22,000
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
Consumer Longs Producer/Merchant forward selling LME Tin 3 Month ($/mt)
Consumer Longs down 22%
Physical market positions in relation to pricesPhysical positioning has been relatively stable this year. Producers and merchants forward selling yet to take full advantage of higher prices
Producer/Merchant –Forward selling (# shorts)
9
4%
6%
8%
10%
12%
14%
16%
$13,000
$14,000
$15,000
$16,000
$17,000
$18,000
$19,000
$20,000
$21,000
LME Tin 3 Month ($/mt) Net money manager (% of O.I)
Money manager positioning increasingNet bullish positioning has been rising through 2016 and mostly price correlated
Longs -Shorts (as % of open interest)
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Tin contracts: Volume and Open Interest
Tonnes traded per month (‘000 m tonnes) Month end open interest (‘000 m tonnes)
SHFE Tin contract has rapidly grown in traded volume since launch in March 2015
0
200
400
600
800
1,000
1,200
1,400
Jan-
14M
ar-1
4M
ay-1
4Ju
l-14
Sep-
14N
ov-1
4Ja
n-15
Mar
-15
May
-15
Jul-1
5Se
p-15
Nov
-15
Jan-
16M
ar-1
6M
ay-1
6Ju
l-16
Sep-
16
LME SHFE
0
20
40
60
80
100
120
140
160
Jan-
14M
ar-1
4M
ay-1
4Ju
l-14
Sep-
14N
ov-1
4Ja
n-15
Mar
-15
May
-15
Jul-1
5Se
p-15
Nov
-15
Jan-
16M
ar-1
6M
ay-1
6Ju
l-16
Sep-
16
LME SHFE
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0
1
2
3
4
5
6
7Open Interest in days of volume
SHFE LME
Open interest
Month end open interest divided by ADV LME Volumes exclude member give up, admin trades
The SHFE Tin contract appears to be predominantly used on a day trading basis
Volume = 1 days positons
Day traders> positon holders
LME tin positons averages 4.8 days of volume
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Forward Curve
SHFE is close Oct 10th. LME close Oct 7th
The LME forward curve has considerable forward open interest, supporting longer term hedgingSH
FELM
E
0
2
4
6
8
10
12
14
¥115,000
¥120,000
¥125,000
¥130,000
¥135,000
Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17
(‘000
mt)
Open interest (mt) Price (Yuan/mt)
024681012141618
$19,600
$19,700
$19,800
$19,900
$20,000
$20,100
$20,200
(‘000
mt)
Open Interest (mt) Price ($/mt)
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ICDX and LME tin is correlated2016 Jan-August 98% r squared correlation
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LME initiatives to support the Tin industry
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LME Tin Brands
Application also received and in process for MSP PT Mitra Tin brand (6.72ktpa)
9 out of the world’s top 10 producers have LME deliverable brands Lower thresholds to encourage additional listings
Country Brand ProducerBelgium MC Metallo-Chimique N.V.Bolivia ENAF Empresa Metalurgica Vinto
BrazilMAMORE Mineracao Taboca SAWHITE SOLDER BRASIL White Solder Metalurgia e Mineracao Ltda
China
JH Laibin China Tin Smelting Co., Ltd.PGMA CNMC (Guangxi) PGMA Co., Ltd.YS Gejiu Zili Mining and Smelting Co., Ltd. YT Yunnan Tin Company LimitedYUNHENG Yunnan Chengfeng Non-Ferrous Metals Co., Ltd.YINSHENG Gejiu Jinye Mineral Co Ltd
Indonesia
BANKA PT. Timah (Persero) TBKIMLI PT. Bukit TimahKUNDUR PT. Timah (Persero) TBKMENTOK PT. Timah (Persero) TBKRBT* PT. Refined Bangka TinTININDO PT. Tinindo Inter NusaIMLI BELITUNG PT. Babel Inti Perkasa
Malaysia MALAYSIA SMELTING CORPORATION Malaysia Smelting Corporation Bhd.
ThailandPHUKET Thailand Smelting & Refining Co LtdTHAISARCO Thailand Smelting & Refining Co Ltd
Added since 2015
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LMEshield – secure and effective commodity receipting
• 2001 – LME develops electronic system for warranted-metals, ‘LMEsword’ (c. 5 m tonnes in/out per annum)
• 2014 – Post-Qingdao, leading banks request LME to extend services and expertise to off-warrant market
• 2016 – Launch of LMEshield, building on LMEsword experience and with support from the industry
LMEshield background
• A secure global electronic register for efficient creation, management and transfer of off-warrant warehouse receipts
What is LMEshield?
Expanded trade finance
availabilityReduced risk for
fraud
Improved global off-warrant
warehousing standards
Reduced risk in trading
commodities held on receipt
Efficient processes across
the market
LMEshield
Banks and financing institutions
Warehouses and storage facilities
Physical commodity traders and owners
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LMEshield – further details: [email protected] the warehousing industry beyond existing LME jurisdictions
How can LMEshield help you?Warehouses • Enhanced risk management, improved
customer confidence, operational savings
Banks financing institutions• Reduced risk of fraud and standardisation
of receipt structure
Physical commodity traders and owners• Transparent financing and efficient
ownership transfer
1. Ongoing working group of up to 20 warehouses, banks and trading firms
2. MOU signed 21st March with Mercuria, Henry Bath and CMST to list LMEshield warehouses along China’s ‘The Belt and Road’ routes
3. April 2016 launch of LMEshield service
4. Fee-free usage until September 2016, with fee credit rewards for usage prior to September
Recent developments
LMEshield jurisdictionsDay-1 South American jurisdictions
• Brazil• Chile• f
Rest of South America LMEshield locations
Other Day-1 LMEshield jurisdictions
Belgium UAE Spain
Germany UK Singapore
India USA South Korea
Italy Japan South Africa
Sweden Malaysia Qatar
Netherlands Saudi Arabia Taiwan
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