September was a pretty rough month for commodities across the board. A partial government shutdown as well as concerns over raising the debt ceiling continued to put pressure on this corner of investing. While the commodities in the precious and industrial space have given dull performances of late, tin is the only metal that is moving higher.
In fact, iPath Dow Jones-UBS Tin Subindex Total Return ETN (NYSEARCA:JJT) was up over 4% in the trailing past month, clearly outpacing the broad PowerShares DB base metals Fund (NYSEARCA:DBB) and PowerShares DB Commodity Index Tracking Fund (NYSEARCA:DBC) by wide margins. Further, the product has been the best performer in the industrial metal space from a year-to-date look.
This is especially true thanks to continued supply constraints, as well as the new rules in Indonesia that are discouraging exports (read:Indonesia ETFs Slide on More Currency Troubles).
Further, according to the recent report from Standard Bank Group, tin prices will likely continue to surge and would outperform the main industrial metals, including copper, zinc and lead, going forward. This is primarily thanks to a supply shortage and a lack of new mining projects to produce more tin.
Indonesia: The Real Booster
About two-fifths of the global tin supplies come from Indonesia, the world’s second largest producer and the biggest exporter. Effective August 30, the Indonesian policy regarding tin export has changed. The new rule requires that the metal must trade on a local exchange before the shipments.
Though the new rule is part of wider government efforts to enhance the value of commodity shipments, it has taken a toll on exports. Exports from Indonesia tumbled to a six year low in September as shipments of tin used in smartphones and packaging plunged 88% from August.
The policy change and the lower export from Indonesia suggest bullish fundamentals for tin at least for the short term. As such, investors could easily take advantage of this trend by focusing on the only pure play tin ETF in the market, which we have highlighted in greater detail below.
Tin ETF in Focus
This product provides exposure through an unleveraged investment in the futures contracts on tin. It tracks the Dow Jones-UBS Tin Subindex Total Return, which consists of one futures contract on the commodity.
The product is a bit expensive as it charges 75 bps in fees per year. It trades in paltry volumes of less than 3,000 shares on an average daily basis that increases the trading cost in the form of a wide bid/ask spread. The fund has managed to accumulate assets worth $4.2 million.