LONDON, April 11 (Reuters) - The London Metal Exchange

(LME) tin price has surged to near two-year highs this week as

exchange inventory slides and yet another threat to an already

stressed supply chain emerges.

LME three-month metal hit $33,130 per metric ton on

Wednesday, a level last traded in June 2022. Currently trading

at $32,000, tin is now up by 27% since the start of the year.

Copper, the second-best performer among the LME base metals

suite, is up by a comparatively modest 10% since the start of

January.

Speculative buying has played its part in the sharp rally,

with fund positioning as bullish as it's been since March 2022,

when the price was on a super-charged run to above $50,000 per

ton.

Tin is clearly back in the spotlight as investors buy into

the market's bull narrative of resurgent demand and challenged

supply.

Already facing disruption in Indonesia, the world's largest

exporter of metal, and Myanmar, home to the world's largest

mine, tin is now facing a third threat in the form of escalating

violence in the tin-rich province of North Kivu in the

Democratic Republic of Congo.

NEW THREAT

Kivu has long been a hub of artisanal mining for the

so-called "3Ts", namely tin, tantalum and tungsten.

It is also home to the Bisie tin mine, which was once

artisanal but is now mechanised and operated by Alphamin

Resources ( AFMJF ). Bisie produced 12,600 tons of tin in

concentrate last year, accounting for around 4.5% of global

supply.

Material mined from both Bisie and artisanal sources flows

across the Goma border crossing with Rwanda, a part of the

country that has fallen under the control of the M23 rebel

group.

The increasingly violent confrontation with government

forces has displaced an estimated 800,000 people and key access

roads to Goma are now under rebel control.

The International Tin Association (ITA), which has been

monitoring the fast-deteriorating situation in North Kivu, notes

that while there is no evidence yet of tin exports being halted,

"delays may be expected as mineral shipments are rerouted

further north and south away from rebel-controlled areas."

It's the last thing Asian smelters need right now, given the

continued uncertainty around the status of the Man Maw mine in

Myanmar.

The mine is controlled by the semi-autonomous Wa State,

which ordered the suspension of mining activities last August.

Surface stocks have continued to be shipped across the border,

but Chinese smelters have been lifting imports from other

countries to compensate, including the Congo.

METAL SQUEEZE

At least one tin supply disruption is abating as Indonesian

authorities catch up on delays to the annual export licensing

process.

Two of the country's largest producers, including PT Timah

, have now restarted exports, according to the ITA.

However, the sharp drop in Indonesian shipments to just 55

tons over the first two months of this year is already

tightening the Western market.

LME headline tin stocks have slumped by 46% to 4,145 tons

since the start of the year and are now the lowest since last

July. Excluding metal earmarked for physical load-out, available

stocks are just 3,650 tons.

The stocks squeeze has rippled through LME short-dated

time-spreads. In the space of three weeks, the benchmark

cash-to-three-months period has shifted from a

contango of more than $200 per ton to a backwardation of $84 as

of Wednesday's close.

DEMAND RECOVERY

The draw on LME stocks also attests to a demand recovery in

the electronics sector, where tin is used in circuit-board

soldering.

The sector, accounting for about half of all global tin

usage, saw falling sales last year as a cost of living squeeze

in many Western countries suppressed demand for new purchases of

electronic goods.

However, semiconductor sales, another useful indicator of

electronic goods demand, seem to have troughed around the middle

of last year and have been recovering ever since. Global sales

in February were up 16% on last year, according to the most

recent figures from the Semiconductor Industry Association.

It's noticeable that the tin price has been closely tracking

the Philadelphia Stock Exchange Semiconductor Index, which has

surged by 52% from its January low.

But the two have diverged over the last few days, suggesting

that tin is now trading on its own momentum as much as its

fundamentals.

FUNDS RUSH TO BUY

Fund money has surged into the London tin market and

positioning is now as bullish as it was during the mega rally of

2021 and early 2022.

Investment funds have lifted long positions to 3,134

contracts, which is the highest level since the LME started

publishing its Commitments of Traders Report in 2018.

The position is equivalent to 15,670 metric tons, which

doesn't sound like much until you consider the level of LME

inventory.

Funds are net long of the tin contract to the tune of 2,371

contracts, which is just short of the March 2022 peak. That's

down to the fact there are still shorts in the London market,

whereas there were almost none when the price was rocketing up

to $50,000.

It's worth noting that positioning in the LME's "Other

Financial" category, which captures index and insurance

entities, flipped to net long in January with the position now

at 328 contracts, the most bullish it's been since the start of

2022.

Tin is a relatively small LME contract and the scale of

speculative inflows injects extra unpredictability into an

already volatile market.

That underlying volatility is only going to get worse as the

number of potential supply threats multiplies.

The opinions expressed here are those of the author, a

columnist for Reuters.

(Editing by Paul Simao)