Tin price bubble spells toil and trouble for global industry

LONDON, Jan 16 (Reuters) - The tin market has kicked off the new year in explosive form, prices racing to all-time nominal highs on both the London and Shanghai markets.

The rally is "unreasonable", according to the state-backed China Nonferrous Metals Industry Association (CNMIA). It warned all parties last month to "avoid blindly following the trend".

Beijing's admonition hasn't in any way deterred Chinese investors from doing just that and chasing the price ever higher.

The volume of trading on the Shanghai Futures Exchange's (ShFE) tin contract exceeded a million tonnes on Thursday. That's more than twice the world's annual physical usage.

Tin is clearly in a speculative bubble, which will burst just as soon as the trend turns. But the mismatch between the size of the physical market and investment interest foreshadows more volatility ahead.