Tin Crisis May Close Exchange, Official Warns
Britain’s financial experts Sunday warned that the crisis affecting the world tin market could force the closure of the London Metal Exchange and trigger a string of bankruptcies.
LME Chief Executive Mike Brown said in a television interview that he had told Trade and Industry Secretary Leon Brittan that the 108-year-old institution could cease to exist as a direct result of the crisis.
“We explained to him the gravity of the situation and that, if nothing happened, we were seriously talking about probably the end of the London Metal Exchange, total chaos, lack of confidence, the bankruptcy of the exchange spilling over into other markets,” he said.
Organize ‘Soft Landing’
Brown said he hoped that tin producing countries could pay their debts to avert a major financial disaster.
He added: “I think it will be down to the metal exchange to organize a soft landing for tin, at a lower price obviously but not a price which is arrived at in a panic, where everybody is trying to unload tin and the banks are forced to become tin traders.” He warned that the price of tin would drop through the floor in the absence of a calculated rescue package.
Brown said contingency plans were being considered to prevent a steep fall in the metal’s price. Trading in cash and controlled marketing techniques would help check wild price fluctuations, he said.
LME, the world’s major forum for metals trading, suspended tin dealings Oct. 24 after the International Tin Council, which buys and sells tin in the market, announced that it had run out of cash to prop up prices above free-market levels.
Brown’s concern was echoed by Colin Clark, a director of Holco Trading Co., which specializes in commodities in the City of London. Brown said that, if the International Tin Council failed to honor its commitments to brokers on the metal exchange, the effect would be disastrous.
“If those commitments are not met, brokers could incur losses running to the order of 200 million (pounds) sterling (about $280 million), and the overriding fear is one of a series of collapses,” Clark said in the interview.
The International Tin Council’s 22 producer and consumer signatories met for two days of crisis talks in London last week but failed to agree on how to find a solution in the face of a glutted market. They are scheduled to meet next week.
