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.
iPath Dow Jones-UBS Tin Subindex Total Return ETN (
was up over 4% in the trailing past month, clearly outpacing the
broad PowerShares DB base metals Fund (
) and PowerShares DB Commodity Index Tracking Fund (
) 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
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.
: 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
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 (see:
all the Industrial Metals ETFs here
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 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.
JJT is down about 2.71% in the year-to-date period. The ETF
currently has a Zacks ETF Rank of 2 or 'Buy' rating implying that
there is significant bullishness facing the ETN in the months ahead
3 Metal ETFs to Buy on the Commodity Upswing
State of Backwardation: A Positive Factor
Moreover, JJT is currently benefiting from the roll yield. Roll
yield is the positive or negative return that occurs when a futures
index or ETF rolls from the near month's contract to the next
The roll yield is positive when the futures market is in
backwardation and negative when the futures market is in contango.
Basically, if the price of the near month contract is higher than
the next month futures contract, then this is backwardation.
Currently, the tin market is in backwardation, which is bullish for
the commodity and the tin ETF, JJT. A market in backwardation
signifies that demand exceeds supply boosting tin prices higher
Play Goldman's Views with These Commodity ETFs
Given that tin prices seem to be on the rise with supply/demand
imbalances, JJT could be an interesting pick for investors looking
to make a concentrated play on tin in the industrial metals market.
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PWRSH-DB B METL (DBB): ETF Research Reports
PWRSH-DB COMDTY (DBC): ETF Research Reports
IPATH-DJ-A TIN (JJT): ETF Research Reports
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