Tin set to re-test record highs on China demand Tin is likely to return to the record high it hit in April later this year, after being the laggard in the London Metal Exchange, as an expected rise in demand from China's manufacturing and electronics sectors combines with a tight supply outlook.Analysts say China's economy is set to grow and its demand for tin to increase as long as the global economy avoids a recession. That demand will also get a boost as China takes advantage of cheaper pricing in Europe to turn net importer following months of exporting large quantities of the metal.Meanwhile, new tin mining projects are not seen taking off until at least 2013. Analysts say global consumption is set to outstrip supply later this year, leaving scope for tin prices to move higher."The supply outlook is very challenging. We think that the market is in a deficit this year and much of that deficit will play out in the second half," said Gayle Berry, an analyst at Barclays Capital."We think the fundamental outlook looks better for tin in the second half of the year so we're looking for prices to move up," he added.Tin has underperformed other base metals, with a peak and trough of more than 35 per cent this year, which has put it on the radar screens of investors looking to capitalise on the metal's strong fundamentals. By comparison, lead's peak-to-trough has been 24.7 per cent.Tin for three-months delivery on the London Metal Exchange hit a record $33,600 a tonne on April 11, but has subsequently lost ground, and on Tuesday it was around $23,500.Evidence of an improvement in Chinese demand for the metal came from customs data showing that tin and alloy imports surged by 84.1 per cent month-on-month to 1,578 tonnes in June, the highest levels since August 2010.Price differences may also boost Chinese demand for European tin. Comparing the premiums that buyers must pay for physical metal over Shanghai and LME exchange prices, the levels are 20 percent higher in China than in Europe, according to traders.Chinese consumption of tin is expected to rise to 160,000 tonnes in 2011 and 168,000 in 2010 from 153,000 in 2010, according to Natixis.These expectations of strong Chinese demand largely depend on the outlook for the global economy, especially given signs of a slowdown in China's major export markets, the United States and Europe.But some analysts regard the current disappointing string of economic data as signs the economy is going through a soft patch, rather than signalling a recession."We ... expect demand (in China) to increase once headline inflation is brought under control and economic growth is allowed to re-accelerate," Natixis analysts wrote in a note."Initially, this will result in opportunistic restocking from Chinese purchasers on any dips in price," they said."Ultimately, a return to stronger growth in developing countries will make restocking demand less price sensitive, and LME prices will be pushed higher by an increase in import arbitrage opportunities."Tin stocks in LME warehouses stood at 23,180 tonnes, up from 16,375 tonnes in early January, but analysts expect these levels to fall as the Chinese market moves into deficit."The Chinese market is now fully destocked and in deficit, which should start to attract higher import levels," Barclays Capital said in a note.Meanwhile, Japanese demand for raw materials is showing signs of slowly recovering from the earthquake and tsunami in March.In the longer term, tin will continue to benefit from a trend that it has been replacing lead in solder. Solders in manufacturing are now 65 per cent lead-free, according to UK-based consulting firm ITRI. These numbers are seen moving towards 100 per cent in the next 10 years."The demand side looks pretty assured. It's really a challenge for the mining companies to meet that demand," said Robin Bhar, an analyst at Credit Agricole."That may change in two or three years when some of the bigger projects are commissioned, but otherwise there's a dearth of supply to meet what is still good demand over the next couple of years," he said, adding that he expected a deficit of 15,000 to 20,000 tonnes this year."There has been a long-term issue with tin where we don't see many new mines opening up until 2013-2014," said Peter Kettle, manager of statistics and market studies at ITRI."If the world economy does keep growing, there is a risk of growing supply shortfalls through the next couple of years."In Indonesia, the world's top refined tin exporter and the second-largest producer after China, a government crackdown on illegal mining, tighter export rules and declining onshore reserves are seen hindering production.A senior trade official said earlier this month Indonesia was looking to revise royalty payments on all domestic tin shipments to close a tax loophole and bring these in line with existing charges on exports."We have seen Indonesian policy having a significant impact on tin in recent years, notably with the clampdown on 'illegal' tin mining constraining tin ore/concentrate shipments over the past year and a half," said David Wilson, an analyst at Societe Generale, adding that more policy moves would support prices.