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Tin Shipments From Indonesia Seen at Lowest in Seven Years

Tin sales from Indonesia, the world’s largest supplier, may decline to the lowest level in seven years as the country raises purity standards for shipments, increasing the global deficit and boosting prices.

Exports will probably drop 20 percent this year to 79,000 metric tons as new rules take effect from July 1, according to the median of estimates from seven smelter executives and one analyst compiled by Bloomberg. That’s lower than in every year back to 2007, when the Trade Ministry started checking sales, and less than the 80,000 tons in a survey published May 7.

Tin fell into a bear market last month, following copper and lead, on concern a slowdown in Europe and China would cut demand. Indonesia will impose the rules as planned, raising the minimum grade to 99.9 percent from 99.85 percent and cutting lead and cadmium levels, the Trade Ministry said June 19. The global shortage may exceed 4,000 tons in 2013, said Peter Kettle, research manager at St. Albans, England-based group ITRI Ltd., whose members represented 60 percent of output last year.

“We see the market returning to deficit in the second half of this year as a result of lower Indonesian sales and some improvement in electronics sector demand,” Kettle said in an e-mail June 21. He estimates the 2012 deficit at 3,000 tons.

Futures, which rose 1.1 percent to $19,925 a ton on the London Metal Exchange today, may climb to $24,000 in the second half because of the regulations, President Director Sukrisno of PT Timah, the third-biggest producer, said June 19. Tin has dropped 15 percent this year, about the same as the decline in the LME index of six metals.

Strict Enforcement

The rules “will result in a big drop in shipments in July and August,” said Kettle. “If the new regulation continues as it is and is strictly enforced for more than three months, we will see higher LME prices.”

Some smelters in Bangka Belitung province, Indonesia’s main producer, are in a “wait and see” mode, expecting a delay or easing of the rules, Hidayat Arsani, president of the Indonesian Tin Mining Association, said June 17. While most smelters can meet the purity level of 99.9 percent, some find it hard to comply with reduced levels for lead and cadmium, he said. Only 13 percent of 40 independent smelters would be able to comply with the standard at the start, he said.

Timah (TINS), which can comply with the rules, has met surveyors in a bid to ensure that the purity standard is properly applied from the beginning, said Sukrisno, who expects shipments may drop as much as 24 percent to 75,000 tons this year.

“Depending on the severity of supply reductions, tin may see some rally when the regulations take effect on July 1,” Barnabas Gan, a Singapore-based analyst at OCBC Bank, said by e-mail June 24. Gan expects LME prices to stay above the $20,000 level next month.

Exports from Indonesia climbed the most in eight months in May as smelters boosted shipments before the rules take effect. Sales surged 18 percent from April to 9,242 tons, raising the total 17 percent in the first five months to 43,900 tons from a year earlier, according to data compiled by Bloomberg.

To contact the reporter on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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