Wednesday, September 7, 2016

Commodities: "Pity the Tin Whale"

Is it Red Kite?
From Bloomberg Gadfly:
There's a player out there who's controlling the tin market, with more than half of cash and next-day positions in the thinly traded metal. If you believe they're about to make their fortune, think again.
The theory of market corners hasn't changed much since the Book of Genesis. The patriarch Joseph interpreted a dream of the Egyptian pharaoh to predict the country would see seven years of bounteous crops, followed by seven years of famine. The pharaoh used the former to build a huge inventory of grain, and then became even richer selling it to his subjects when hunger started to bite.

That's not so different to what the Hunt brothers tried to do with the global silver market in the late 1970s. After cornering as much as half of deliverable silver stocks, they briefly became among the world's richest men when the price of the precious metal rose fivefold in late 1979 and early 1980. It didn't end well: U.S. regulators restricted credit to metal speculators and both siblings ended up declaring bankruptcy.

Similar attempts to accumulate outsize commodities positions brought ruin to the whales in the tin market in the early 1980s, and to Thailand's former prime minister Yingluck Shinawatra, who was removed in a 2014 coup after her government used a subsidy system in a failed attempt to exert more influence over rice markets.

Tin has been one of the world's better-performing metals this year because so much of its supply comes from Indonesia, which has imposed restrictions on exports of raw commodities and tightened environmental rules around a notoriously polluting and under-regulated industry.

Those Who Wait
Tin is the only major base metal right now that you can buy more cheaply in three months
 It's in the sharpest backwardation of any of the major base metals on the London Metal Exchange, costing about $445 less if you're prepared to accept delivery in December 2017 rather than this month....MORE