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Figure 1 below shows the price of Tin over the past five years. It can be seen from Figure 1 that the price of tin has fluctuate - Essay Example

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Macro and Micro Economics Introduction The tin market has been severely affected in the financial crisis of 2008. Such was the impact that the market in the first and the second half of the 2008 were completely two different pictures (Asian Metal Ltd., 2008)…
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Figure 1 below shows the price of Tin over the past five years. It can be seen from Figure 1 that the price of tin has fluctuate
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Figure 1 below shows the price of Tin over the past five years. It can be seen from Figure 1 that the price of tin has fluctuate

Download file to see previous pages... The pricing of tin in three different periods of 2008-2009, 2009-2011 and 2011-2013 will be studied. The correlation between the housing and construction industry with the tin industry will be analyzed to reach the conclusion. The supply curve concept and its implication on the tin industry will be discussed in the essay. Tin Prices: 2008-2013 The following graph shows the prices of tin in the time period under study. Figure 1: Tin prices from 2008-2013 (Source: London Metal Exchange, 2013) 2008-2009: The chief reason for the fall in the price of tin in 2008 began with excess supply. The year began on a cheerful note when, in April 2008, prices of tin touched the highest mark of US $2600 per ton (Asian Metal Ltd, 2008). The movement in the price of the currency also determines the pricing of commodities. An appreciation in the price of dollars stimulates a fall in the price of dollar denominated commodities. This was particularly true in case of agricultural products and prices of base metals (Losoncz, 2008). The prices had been low mainly due to the subprime lending crisis in America and heightened during the period of September 2008. As tin is one of the most important requirements in housing and construction industry, so a fall in the demand for houses in that period had led to a decrease in the demand for tin, which resulted in excess supply in relation to demand, thereby lowering the prices. This can be explained with the help of a supply curve. Figure 2: Supply Curve (Source: Gillespie, 2001) The graph above is that of a supply curve which shows that whenever there is an excess supply, the prices of the commodities tend to fall (Gillespie, 2001). The arrows imply that the prices tend to fall when supply exceeds demand. The subprime lending crisis left the economy with vacant houses and no one to buy it. The banks stopped giving loans for housing constructions (Bianco, 2008). All these lowered the consumer demand for tin, a basic metal in construction and therefore, the prices fell. 2009-2011: The price of tin began to recover with the onset of 2009. The rebound in prices could be attributed to the weakening of dollar against other currencies (Lenzer, 2009). Deprecation in the price of dollars triggers the price of commodities in dollars and this caused the tin prices to rise. Another factor which leads to the rise in tin prices was the rising imports of tin from China. The growing demand of tin from overseas market was also responsible for the rise in the price of tin. Even the improving economical and financial outlook contributed to this rise in the prices. In the aftermath of the global financial crisis, the demand for tin already crashed in 2009 as per the records of World Bureau of Metal Statistics (Burns, 2012). The rise in price of tin during this period was somewhat paradoxical considering the other pressing issues at hand then. The industrial demand for raw material had fallen to a great extent in the advanced European countries. The consumption of tin in America alone rose from 4% to 6% when other industries felt the heat of the financial crisis. This happened mainly because of the rising production of tin to meet the rising production demands of steel cans (U.S. International Trade Commission, 2001). The reaction from the supply side followed quickly after the global crash in demand. This was evident from the fall in the production of tin from the miners and smelters. On the global level, the cuts in supply could partially ...Download file to see next pagesRead More
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