Tin backwardation widens on LME as exchange stocks fall 60% since June

The London Metal Exchange's spot tin price is currently trading at a $670-a-ton premium to forward prices, a phenomenon known as backwardation. This premium represents approximately 1.4% of the $46,700 settlement price for tin. The spread between spot and forward prices is the widest since the 2023 tin squeeze, although it is still far below the levels seen during the backdated market of 2021.

In comparison, most other London Metal Exchange metals have declined in price. The tin quote is slightly delayed by a day, so it should be regarded as approximate. Tin's primary application is in the production of solder for electronics, which links it to the semiconductor industry. The Semiconductor Index (PLX) has declined by 3.80% to 10,107.7 as of 3:31 PM EST, while NVIDIA (NVDA) is trading at $162.16, down 2.42% ahead of its Nov.

17 earnings report. Higher interest rates are also exerting pressure on industrial metals. The U.S. 10-year Treasury yield (US10YT) stands at 5.155%, having risen by 1.04%, and a Federal Reserve rate hike in December appears highly likely. The S&P 500 (US500) is trading at 7,550.34, down 0.56%, and the VIX (CBOE Volatility Index) has risen to 19.11, up 2.19%.

A spot tin price above $50,000 would indicate that the physical supply squeeze has spilled over to the outright price level. Conversely, a significant drop in copper prices, potentially below $6.00 per pound, could further exacerbate the metals market downturn. Backwardation is primarily a warning sign of physical supply constraints rather than a forecast of price movements. Given the relatively small size of the tin market, such signals can change rapidly.