"I think people in the short term are going to start lowering premiums a bit to encourage consumers to buy now rather than later," one trader said. "Everyone is trying to keep their stocks to a minimum because of the backwardation, and as that comes in, it is less of a problem," he added. Cash to threes was quoted at $50/$60 back on the London Metal Exchange (LME) pre-market on Friday, compared with levels above $200 a tonne in July.

A joker in the tin pack remains the presence of one or possibly more dominant longs who had been holding out for premiums of around $200 early last month.

The LME on August 21 placed a $30 a tonne limit on the daily backwardation in tin,shortly after removing a similar informal ceiling, and announced that the dominant position had moved from one holder to another.

The market might remain vulnerable to a possible renewed squeeze in future, some dealers said.

They said Chinese tin in warehouse Rotterdam was being quoted at premiums of around $60/$70 a tonne, while there were occasional trades of apparently unregistered material seen at lower numbers.

Malaysian tin in Rotterdam, for which there was currently lower demand, was quoted at around $20/$30 or slightly more, down from about $35/$50 last week.

Dealers noted LME warehouse stocks had risen in the last couple of months by 1,000 to 2,000 tonnes after falling for much of the year, suggesting slack demand.

"I suppose consumers expect the market to fall, they have seen levels approaching $5,100 earlier this year and they are now reluctant to book forward business -- that is for the first half of next year or even the whole of the year," one said.

He said occasional business wasbeing seen recently chiefly when the tin price dipped or the German mark eased to around 1.67 to the US dollar. Another, however, said talks for the first half of next year were proceeding smoothly.

Tin was quoted around $5,370/80 in Friday's LME pre-market. Some dealers said further pressure on premiums may be coming from tin sales from the US defence stockpile.

On Thursday the five-member Association of Tin Producing Countries (ATPC) "noted with concern" the intention of the US Defense National Stockpile Center to sell off 24,000 tonnes in the next two years and asked it to exercise restraint.

Last week the stockpile sold 4,500 tonnes of tin to Considar, the trading arm of steel maker Arbed SA , with an option for a further 7,908 tonnes. Brokers Billiton Metals Ltd said in a report this week that Western refined production had been lower this year and for all of 1998 it would be about 4-5 per cent below 1997 levels.

But next year the picture would change, especially with the development of Minsur'sSan Rafael mine in Peru.

Billiton said the tin market might have seen a sizeable surplus this year had it not been for some supply disruptions which were ongoing in the West but being offset by poor offtake and net imports.

It said persistent nearby technical tightness and comparatively low visible stocks made further price spikes possible but attempts on the upside would be hard to sustain.