Malaysia tin up to 8-year high

Malaysia tin up to 8-year high

KUALA LUMPUR (Reuters): Malaysia's spot tin price rallied to an eight-year high yesterday, and industry sources and traders said prospects for the metal remain bullish on the back of a falling ringgit currency.

"Tin is seen climbing to 21 to 22 ringgit if the ringgit continues to slide further in the near-term. Tin depends solely on currency fluctuations," said an industry source.

A weak ringgit makes Malaysian exports more competitive.

"The situation in the local currency is not yet stable and this has somewhat triggered a bullish sentiment in the market," the source said. "I think KLTM prices are more influenced by the currency rather than supply and demand factors."

On Tuesday, tin prices on the Kuala Lumpur Tin Market (KLTM) surged 1.18 ringgit to 20.92 ringgit a kg, the highest level since October 1989 when the price hit 21.60 ringgit.

Tin prices have risen by about 44 percent since starting to rise from 14.50 ringgit in August, traders said.

"The ringgit fell to a new low on Tuesday morning. People panicked and started to scramble to buy tin for fear that prices would rise further on the currency," a senior dealer based in the northern state of Penang said.

The Malaysian ringgit tumbled to a record low of 3.62 to the dollar on Tuesday, down over 30 percent since July.

"Demand is expected from Europe and the U.S. as they could purchase cheaper metal here in ringgit terms," the trader said.

"Fundamentally the market is sound. Stocks in London Metal Exchange warehouse is seen decreasing. Local supply is tight as most mines have shut down recently," the trader said.

The industry source added: "In the U.S., demand for tin in that country remains good with tin users, especially in the solder and chemicals industries remaining buoyant."

But the source said the current financial turmoil could affect demand.

"Like in Japan, there is a slowdown in construction industries which used base metals like tin.

"The effect of the financial crisis in Southeast Asia has created nervousness in the economies of the region. Like in Asian producer countries like Thailand, Indonesia and the Philippines, we feel demand here will be reduced as the local price has risen sharply," the source added.