TIN TRADERS' RESPONSE MUTED TO KL FUTURES MARKET
  European free market tin traders made a
  somewhat muted response to plans for a Kuala Lumpur
  dollar-based tin futures market due to be launched in October.
      Traders said the new market would probably be a useful
  trading medium for Japan and other South East Asian tin
  interests although European traders generally appear to be
  reasonably satisfied with the current "free market" system
  which has been operating since London Metal Exchange, LME, tin
  trading ceased in October 1985. Dealers here will also want to
  see how acceptable foreign metal will be on the new market and
  what sort of demand develops for forward deliveries.
      There is also a view among European traders that, while the
  proposed Kuala Lumpur tin futures market would provide another
  useful reference point, a market inaugurated by the Malaysian
  government -- in the past viewed as a major player at times by
  the trade -- would make participants uncomfortable.
      Some traders expressed a preference for a resumption of
  trading on the London Metal Exchange, but they added that while
  there has been some behind the scenes discussion on the subject
  a definite move is unlikely until outstanding High Court
  litigation actions have been resolved.
      Spot tin prices on the European free market are currently
  around 4,200 stg per tonne for high grade metal in warehouse
  Rotterdam. Over the past 18 months the price moved to a ten
  year low of 3,400 stg in March 1986 and rebounded to as high as
  4,680 stg in December 1986.
      This compares with 8,140 stg last paid when LME trading
  ceased in October 1985 and a record high tin price of 10,350
  stg traded for Cash Standard Grade metal in June of that year.
      LME warehouse stocks are now near a two-year low at 28,065
  tonnes, having fallen steadily from a record high of 72,485
  tonnes reached in February 1986.
      Traders said the free market turned bullish during late
  last year based on producer forecasts of a supply/demand
  deficit of some 28,000/29,000 tonnes. Analysts were predicting
  prices of up to 5,000 stg per tonne during 1987.
      However, the trend was reversed following a strong upswing
  in sterling versus the dollar and values fell back briefly to
  4,100 stg last month after approaching 4,700 stg in December.
      The decline accelerated as producers who had sold very
  little metal at the higher levels became competitive sellers.
      There was also a lack of significant demand from major
  steel mills who made large purchases prior to the new year.
      Traders say the 15 ITC creditor banks' original tin
  holdings of nearly 45,000 tonnes have now been almost halved,
  and the bulk of material still available is being held by
  Malaysian and Japanese firms which are reluctant to depress the
  market with unwanted metal.
      Some 80,000 tonnes were held by banks and brokers after the
  International Tin Council's, ITC, buffer stock manager halted
  support operations on the LME on behalf of the 22 members
  nations of the International Tin Agreement.
      The overhang of metal was reduced further by broker
  Shearson Lehman Brothers, which earlier this year reported
  having sold its ITC-related holdings and halved its overall tin
  position.
      Analysts see no immediate sign of a rally in European tin
  prices and movements are still expected to be largely related
  to currency fluctuations, unless significant consumer demand
  emerges for the third quarter.
      The Association of Tin Producing Countries, ATPC, has made
  efforts since the collapse of the ITA to achieve higher world
  prices by attempting to bring all major producers under an
  export control umbrella, but to date Brazil and China, two
  major producers, remain unaffected by the ATPC argument and
  apparently are continuing to offer material at discounts to
  consumers in main European trading centres, dealers said.
  

