In his 1945 essay “The Use of Knowledge in Society”, Friedrich Hayek wrote:
It is worth contemplating for a moment a very simple and mundane example of the action of the price system to see what precisely it accomplishes. Suppose somewhere in the world a new possibility of using a raw material, say tin, has arisen, or one of the sources of supply for tin has been eliminated. It matters little for our purposes — and it is very significant that it does not matter — which of these two causes has made tin rarer. All tin users need to know is that some of the tin they used to consume is now being used more profitably elsewhere and therefore they need to save tin. It is not even necessary for the vast majority of them to know where the most urgent need comes from, or in favor of what other needs they must meet. If only a few of them know the new demand directly and devote resources to it, and if those who are aware of the new vacuum thus created in turn fill it from still other sources, the effect will spread rapidly. in the whole economy. system and influences not only all the uses of tin, but also those of its substitutes and substitutes for such substitutes, the supply of all things made of tin, and their substitutes, and so on; and all this without the great majority of those who helped bring about these substitutions knowing anything of the original cause of these changes. The whole acts as a single marketplace, not because any one of its members oversees the whole field, but because their limited individual fields of vision overlap enough that, through many intermediaries, relevant information is communicated to all. The mere fact that there is a price for any commodity – or rather that local prices are related in some way by the cost of transport etc. a single mind possessing all the information that is actually dispersed among everyone involved in the process.
Hayek was talking about the power of market prices to coordinate our behavior. The market price of tin aggregates vast amounts of information from around the world into a single figure useful in telling sellers how much to make and buyers how much to consume. For market prices to work as a coordinating mechanism, we don’t really need to know why they move. All we need to know is the market price, and it will guide our decisions – a remarkable and counter-intuitive insight.
So when I saw this article from S&P Global, my first thought was, “Who cares?
Of course, to make inferences about a market price, we need more information than the price. As Hayek puts it, price changes could result from changes in tin demand, tin supply, or both. In this case, low inventories mean extremely volatile tin prices. The article says:
Small increases or decreases in production can have a dramatic impact on prices for commodities like tin, where inventories are “extremely thin”, said Peter Arden, founder of research firm Groundwork Pty. Ltd., to Commodity Insights.
“There was absolutely no metal available. That’s why the price has gone up so much,” Arden said. “Tin prices had fallen [hot] in 2021, but this year they were also caught up in the Russian invasion which definitely had an effect on all commodity markets.
Russia was expected to supply around 1% of the world’s tin, so the invasion is not a direct cause of the price changes, the article said.
“Indirect impacts include increased oil and gas prices globally (but particularly in Europe), as well as some shipping delays,” Willoughby told S&P Global Commodity Insights in an email interview. “Other markets are affected, which in turn impacts tin.”
A correction is coming though:
A new wave of COVID-19 in China is expected to hurt tin demand, and global inflation could slow the overall economy, suggesting tin prices “will face near-term corrective pressure” , Beijing-based ITA market analyst Daniel Xia. , told Commodity Insights in an email interview.
At the same time, tin production in Indonesia and Malaysia has increased in recent months. Malaysian production has recovered since the world’s third largest producer of refined pewter, Malaysia Smelting Corp. Bhd., lifted its force majeure related to COVID-19 on December 20, 2021, Andrew Radonjic, managing director of Australian tin developer Venture Minerals Ltd. , told Commodity Insights.
So there you have it: More information than you absolutely need on the pewter market. To be “dispersed among all involved in the process” of the tin industry at market price, plus an article and blog post to explain it – the magic of the internet.