Cartel Meets but Fails to Agree on Action : No Quick Fix Seen for Tin Crisis
The International Tin Council failed Thursday to reach an agreement that would permit an orderly resumption of trading in the metal, and its inaction plunged world tin markets deeper into crisis.
Following two days of emergency meetings, representatives of the 22 tin-producing and tin-consuming nations that make up the ITC were not able to set an opening price, and they refused to make any commitment to honor the council’s debts, which are estimated at $100 million to $450 million.
“No one expected long-term solutions out of this meeting, but, without any commitment to honor their debts, the crisis can only get worse,” said Angus McMillan, a metals trading expert at Shearson Lehman Bros.
A colleague at the firm said the lack of movement was appalling, adding that uncertainty about the future of tin trading has depressed the volume of other metals traded on the London Metal Exchange.
The ITC said it would reconvene another emergency meeting Nov. 14.
Trading in tin has been suspended since Oct. 24 on the world’s two major markets, London and Kuala Lumpur, Malaysia. It was suspended when the ITC announced that it had exhausted the fund that it had set up to support a minimum world price for tin.
The ITC had also run up a large debt with banks and metals brokers in a futile attempt to buy up enough tin to maintain the minimum price in an increasingly glutted market.
The dispute over who will pay the debt has added additional factors to the crisis, among them:
- Metals analysts in London believe that continued uncertainty about the market and growing doubt about the ITC commitment to an orderly resumption of trading will act to further depress the price of tin once trading is resumed.
It is not considered likely that trading can reopen near the minimum price at the time trading was suspended--8,140 pounds sterling per metric ton (about $11,730)--but to what extent the price falls could determine the fate of hundreds of mines and thousands of jobs in key producing countries such as Malaysia, Indonesia and Thailand.
- The London Metal Exchange, which feels that the ITC default has eroded confidence in its dealings, is under growing pressure from some members to close the tin market permanently. Closing the London tin market would bring even more disorder to the global market.
Exchange Chairman Jacques K. Lion wrote to Prime Minister Margaret Thatcher on Thursday, asking for her help in the effort to resolve the crisis. He reportedly asked for government funds to help clear obligations still pending from the day trading was suspended.
The prolonged closure of the two major tin exchanges has led to the emergence of small secondary markets in Europe that could eventually set a free-market price that the ITC would find impossible to ignore.
London metals brokers reported small amounts of tin changing hands in Europe on Thursday at about 5,500 pounds sterling per metric ton.
“If this drags on further, we’ll see it drop to around 4,000 pounds,” McMillan said.
The ITC’s failure to agree to honor its debt and set an opening price was attributed to the inability of some member governments to quantify their possible losses. Because much of the debt is in contractual arrangements to buy large amounts of tin at the price in effect when trading was suspended, or higher, the size of the debt depends on the future price of the metal--still a point of dispute.
