Tin price rally crashes to a halt after SHFE probes traders

Tin retreated from a record after the Shanghai Futures Exchange announced restrictions on positions for some clients suspected of not properly disclosing their ultimate ownership.

Three groups of clients — numbering sixteen in total — will be subject to one-month limits on opening new positions, as well as curbs on withdrawing funds from both the tin and silver markets, the bourse said in a statement. Tin slumped more than 6% in London, while the action by China’s top commodities exchange prompted other metals including copper to soften.

Global metals markets — both base and precious — have seen powerful rallies and a surge in trading activity since the start of the year, with many materials hitting all-time peaks. The advances have already prompted other measures by commodities exchanges to tackle market risks.

Tin saw a major spike last week — gaining more than 18% on the London Metal Exchange — and hit a fresh record earlier on Monday. The metal, used in packaging and electronics, is a relatively small market in London, compared with materials such as copper and aluminum. It can be prone to big swings.

“Metals have risen too rapidly,” said Gao Yin, an analyst at Shuohe Asset Management Co. With “measures against trading, sentiment will be cooling a bit,” Gao said.

SHFE’s announcement of trading restrictions on tin and silver didn’t give any details about which companies were affected, exactly what was being investigated, nor the precise scope of the curbs. It said the clients were suspected of “failing to disclose actual control relationships,” according to the statement.

In Shanghai, tin ended 1% lower at 425,340 yuan ($61,133) a ton, after earlier gaining as much as 7.7% to a record. On the LME, futures fell 4.5% to settle at $54,232 a ton, after gaining 1.2% to an all-time high. At the close of last week, the LME price had been up about 40% year—to-date.

Other metals were mixed after a strong showing on Friday spurred by increasingly negative sentiment toward the US dollar. Speculation about potential US involvement in foreign-exchange intervention in Japan was the latest driver of weakness in the greenback, following a week of geopolitical turmoil that emboldened the currency’s bears.

Still, some analysts have cautioned that soaring prices for copper and other metals are not aligned with relatively weak fundamentals. Consumption in China has been soft, for example, with stockpiles of copper in SHFE-tracked warehouses rising last week to their highest seasonal level on record.

“The micro-level situation for copper is unfavorable,” said Meng Hao, an analyst at Jinrui Futures Co. “China is in its slow season, leading to continuous rises in inventory. Given the inverse relationship between the micro and macro aspects, I believe that copper prices will remain in a period of high volatility.”

Copper rose 0.6% to settle at $13,199 a ton on the LME, after adding nearly 3% on Friday. Aluminum rose 0.6% and zinc gained 2.5%.

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