Has the turning point of tin ore supply in Burma already appeared?

According to relevant reports, Myanmar has become the most important focus of attention in the global tin market in the past two years. The prediction of the decline of Myanmar Tin Mineral production and its impact on tin prices have also been frequently mentioned. In recent months, according to the data released by customs, the freight volume of tin ore in Myanmar is showing a downward trend. Has the inflection point of supply in Myanmar arrived?

In early 2017, it was a difficult start for many mine owners in Burma. Ore grade has dropped sharply, and no more than 5-6 large ore grade has been heard. With the deeper mining of ore bodies, the problem of high temperature hot water is also spreading in the mining area. Without large investment, it is difficult to have efficient mining. In the case of declining raw ore output, many miners believe that the local tin supply will soon be drastically reduced.

But over the past year or so, Burma's exports to China have not decreased substantially. In 2017, Myanmar's shipments even reached a new high of 67,000 tons, and its share of global tin supply rose to 20%. On the one hand, the decline in raw mineral output is true, but on the other hand, the volume of concentrate cargo exported to China is still relatively large. What is the problem? After careful study, we find that inventory plays a key role.

Since 2014, we have investigated the production of tin mine in Burma every year. In the first few years of the boom of tin mining in Myanmar, most of the investment was concentrated on ore mining, and because most of the mining is open-pit high-grade ore, the ore mining volume is very large. However, the capacity of the local selection plant is seriously insufficient, and the technology level of the plant is low. At that time, most of the plant's capacity was 300-500 tons / day, and the concentrate grade was only about 20%. The selected grade of the concentrator is mostly about 3%, and more than 5% of the original ore is exported to China directly. Even so, due to insufficient capacity of the plant, there are still a large number of raw ores being stockpiling.

After 2016, with the continuous improvement of infrastructure in Wa State of Myanmar, especially the completion of the construction of roads and power supply systems, and the lucrative profits of mineral processing, the investment of concentrators has increased substantially. A large number of new large scale and highly technical selection plants are put into operation. At present, the largest concentrator in the area has a capacity of 3000 tons per day, and there are several concentrators with capacity of 2000 tons per day and 1000 tons per day. It is the operation of these concentrators that makes the large backlog of raw ore stocks quickly consumed. We roughly estimate that in September 2017-2018, about 2 million tons of raw ore were consumed and the amount of metal was estimated to be about 25,000 tons. At present, the local residual stock of raw ore is estimated to be about 400,000 tons, and the consumption rate is accelerating.

Due to the sharp reduction of the output of raw minerals and the decline of grade, the local concentrator soon appeared the phenomenon of overcapacity. It is understood that the current local mining plant capacity utilization rate of less than 40%. A large number of the original concentrators have been abandoned, and some of the later ones are unable to start or reach production because of the shortage of raw materials. The profit of the concentrators has been greatly reduced. With the loss of raw ore inventory, some of the mills are estimated to be forced to stop production or cut production.

From the current mining situation, the mining of the new mine in Manxiang mining area of Myanmar has entered the range below 1000 meters above sea level, and the problem of high temperature hot water has become more common, which requires higher investment scale and technical level. Due to the limitation of local geographical conditions and the lack of detailed geological data, it is impossible to attract large scale capital investment. At present, it is difficult to solve the problem of high temperature and hot water in mining area fundamentally because of the financial strength and technical ability of local production enterprises. At the same time, the local ore grade has dropped from 3% in 2016 to about 1%-1.5%. Therefore, the current ore production in some of these mines is very low. There are also a large number of enterprises in the past two years, a large number of old ore holes to recover the ore to maintain production. In the past few years, because of the high-grade ores, enterprises have given priority to mining ores with a grade of more than 3%, and ores with a grade of less than 3% are left in the cave. Over the past two years, this residual ore has also supported local production. But it is understood that the residual ore has basically been completed. Local production enterprises reported that this year there were many mines with relatively high production capacity. Therefore, it can be judged that before the discovery of new and large-scale ore spots, the production of local ore is likely to show an aggravating downward trend.

In addition, we have also observed a significant decrease in concentrate stocks in warehouses at the two ports of China and Myanmar in the past few months. According to our rough statistics, at the end of October this year, the total inventory of the warehouses at the two ports was about 5000 tons. In mid-April this year, the total inventory of the warehouses at the two ports was about 11,000 tons, with a decrease of more than 55%. Among them, the inventory reduction at the Chinese ports was relatively significant. Over the past few years, the stock of bonded warehouses at Chinese ports has generally been around 3000 tons (metal volume), peaking at 5000-6000 tons (metal volume). However, since September this year, bonded warehouse inventory has continued to be less than 1,000 tons (metal volume), a huge reduction. At the same time, we have not seen an increase in the total stocks of Myanmar's ports and mine concentrators. On the contrary, the total stocks of concentrates in these two places have also declined. This roughly reflects the actual decline in tin production in Wa Bang, Myanmar, and the fact that ore and concentrate stocks from mines to warehouses are being consumed in large quantities.

Although from the statistics of Chinese Customs, the volume of goods exported from Myanmar to China did not decrease significantly from January to August this year, considering the above raw ore stocks and concentrates.