ROI-Tin rides the AI investment wave to a new price dimension: Andy Home

Tin is the metal that refuses to fall back ​to earth. Tin prices have more than doubled over the last three years, outperforming the rest of ​the London Metal Exchange pack, even much-hyped copper.

LME three-month tin has been ‌trading ​above the $50,000-per-metric-ton level since June. Prior to this year the brief all-time high of $51,000 per ton was recorded in March 2022, just after Russia's full-scale invasion of Ukraine. The new pricing paradigm speaks to the quiet revolution that has unfolded in tin usage over the last few decades.

A metal associated with the humble tin can ‌has woven its way into the fabric of the internet in the form of circuit-board soldering. Tin-plate packaging now accounts for just around 11% of usage, while solders represent more than half of global demand.

From smart phones to drones, if it's got wiring in, it's also got tin. And artificial intelligence data centers have a lot of wiring in them.

COMPUTATIONAL POWER The surge of investment into AI infrastructure is unprecedented, eclipsing the railroad boom in the 19th century and the dotcom boom in ‌the 20th century even after adjusting for inflation.

Analysts at research house BMI estimate capital expenditure will reach $785 billion this year. Cumulative spending globally on data centers alone could top $30 trillion by 2050, according to a projection ‌by PwC.

The competition for ever greater computing power is translating into explosive growth in semiconductor sales. Global billings have risen for 18 straight months, according to the Semiconductor Industry Association.

Sales in August were $160 billion, up 8% month-on-month and 144% year-on-year. The US is registering the fastest rate of growth, closely followed by China and the rest of Asia. Wherever all those semiconductors end up, they'll need a tiny drop of tin to glue them to the circuit board.

TIN BRIDGE Every gigawatt of installed AI data center capacity needs around 1,200-1,500 tons of tin, more than ⁠three times that ​used in a traditional data center, according to research from Shanghai ⁠Metals Market.

This is a structural change. Traditional servers consume about 500 kg of tin per unit, while AI servers need up to 4-5 tons of tin.

A 10,000-card AI computing center requires 2.5-3.2 tons of printed circuit board solder alone. The more complex the data center architecture, the ⁠more tin it needs to bind everything together.

Tin is, for now at least, the essential electrical and physical bridge to increased computing power. The electronics sector has spent years trying to use less tin, leaving little wriggle room for further thrifting.

The only real ​threat on the horizon is hybrid bonding, but SMM doesn't expect that to make a tangible impact until the next decade. NEW HEIGHTS

While copper bulls wax lyrical about that metal's enhanced demand prospects from the ⁠AI boom, tin is already feeling the force. It's also being helped by accelerating sales of electric vehicles just about everywhere outside of the US. EVs have a lot more wiring than traditional internal combustion vehicles, which of course means more tin soldering.

These new demand drivers help explain why tin ⁠is ​now trading in what until this year was literally uncharted territory. The other part of the equation is tin's problematic supply chain, which is heavily concentrated on a limited number of operators, several in higher-risk jurisdictions such as the Democratic Republic of Congo and the autonomous Wa state in Myanmar.

Production has been relatively smooth this year by tin's highly variable standards, but visible inventory has still been quietly sliding away. Combined stocks registered with the LME, including off-warrant metal, ⁠and the Shanghai Futures Exchange have fallen from a February peak of 22,600 tons to 13,100 tons.

LME time-spreads have started to react. Cash tin was trading at a wide discount of more than $400 per ton ⁠to three-month metal at times in July. The discount has since ⁠contracted to $105 per ton. As the market tightens, we'll see just how far further into the unknown tin can travel.

(The opinions expressed here are those of Andy Home, a columnist for Reuters.) Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. Follow ROI on LinkedIn, and X.

And listen to the ‌Morning Bid daily podcast on Apple, Spotify, ‌or the Reuters app. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a ​week. (Writing by Andy Home; Editing by Jan Harvey)