Timah Sees Tin Trade Slumping to Two-Year Low on New Rule

Tin exports from Indonesia, the largest shipper, are slumping to a two-year low after the government limited cargoes to metal traded on local bourses. Futures climbed for a third day in London.

Shipments of the commodity used in smartphones and computers will drop to as low as 3,000 metric tons this month, according to PT Timah (TINS), the country’s largest producer. That’s less than half the amount in August and the least since November 2011, data compiled by Bloomberg show. Prices may rise as much as 20 percent to $28,000 a ton by the end of the year, Timah President Director Sukrisno said in an interview.

Indonesia, which accounts for about 40 percent of global exports, is seeking to boost the value of commodity sales, including metals. The rule change prompted producers such as state-backed Timah to curb exports as many buyers have yet to become members of an exchange in Jakarta. The impasse is depleting stockpiles tracked by the London Metal Exchange, while boosting prices to the highest level in six months.

“We expect exports will drop further in September after they declined to about 6,000 tons last month,” said Sukrisno, who uses a single name. “That’s not a problem because we’re committed to seek prices, not volume,” he said in Pangkalpinang, Bangka Belitung, where the company is based. Timah’s stock advanced for a third day in Jakarta to the highest in a week.

Photographer: Dimas Ardian/Bloomberg

A forklift driver transports tin ingots for shipping in the warehouse of the PT Timah tin plant in Pangkal Pinang, Bangka Island, Indonesia. Close

A forklift driver transports tin ingots for shipping in the warehouse of the PT Timah... Read More

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Photographer: Dimas Ardian/Bloomberg

A forklift driver transports tin ingots for shipping in the warehouse of the PT Timah tin plant in Pangkal Pinang, Bangka Island, Indonesia.

Tin for delivery in three months outperformed the five other main base metals including copper and lead on the LME in the past year as the Indonesian curbs worsened a global deficit. The metal -- which rose to $23,450 yesterday, the highest price since March 19 -- climbed 0.2 percent to $22,263 at 2:41 p.m. in Jakarta. It was last above $28,000 in August 2011.

Benchmark Price

The new policy is designed to establish a domestically determined benchmark price, Trade Minister Gita Wirjawan said in an interview on Sept. 23. It will be implemented over the long term and shipments are expected to decline, said Wirjawan. While the rule applies to refined ingots at present, it will be extended to cover other products such as solder from 2015.

The change, which took effect Aug. 30, is part of wider government efforts to increase the value of commodity shipments from Southeast Asia’s largest economy. Indonesia has ordered mining companies to build smelters as it plans to ban raw mineral-ore shipments from January 2014. The country imposed a tax on cocoa-bean shipments in 2010 to encourage investment in processing plants. Tin-purity rules were also raised this year.

Timah, which declared force majeure after the policy change, wants to sell to overseas buyers through the Indonesia Commodity and Derivatives Exchange in Jakarta. The company will no longer use term contracts, which specify a fixed quantity for delivery over a set period, Sukrisno said this month.

Limit Shipments

The ICDX -- which has 18 tin-trading members, with eight sellers and 10 buyers -- traded 675 tons of ingots from Aug. 30 to yesterday, bourse data show. The exchange expects the government to stick with the new policy, which aims to limit shipments and increase prices, Christilia Angelica, head of business development, said on Sept. 18.

The forecast for 3,000 tons of exports this month may comprise about 400 tons of ingots that have been traded through the ICDX and about 2,600 tons of other tin products such as solder, Timah Corporate Secretary Agung Nugroho said.

Stockpiles in LME-registered warehouses are heading for the biggest monthly decline since January 2012 as holdings are withdrawn from sheds in Singapore and Malaysia, where most of the metal is stored. The LME-tracked reserves stood at 13,625 tons on Sept. 26, 12 percent lower than at the end of August.

‘Stopped Operations’

“Most of the smelters have stopped operations” as they can’t export, said Tjahyono Mukmin, president director of Serumpun Tin, a group of producers that wants to trade ingots through the Jakarta Futures Exchange, or JFX. “We’re still waiting for a permit for the JFX.”

Indonesia shipped 98,817 tons last year, including 9,874 tons in September, according to trade ministry data. About 0.7 gram of tin is found in a mobile phone and as much as 3 grams in a tablet computer, according to data from St. Albans, England-based ITRI Ltd. and Henkel AG, a Dusseldorf-based solder maker.

The new rules are causing confusion, which is supporting prices, Standard Bank Group Ltd. said Sept. 11. The global deficit is forecast to more than double from 6,000 tons this year to 13,000 tons in 2015 as demand beats supplies, Standard Bank said in a report. Citigroup Inc. raised its 2014 forecast 9.1 percent to $22,375 a ton, according to a report this week.

“In August, tin surged to $22,000 to 23,000, which exceeded my expectations,” said Timah’s Sukrisno. “If the current trend continues, prices will most likely rise to $25,000 a ton in October. I’m even optimistic it will reach $28,000 a ton by the year-end.”

Shares in Timah rose as much as 4 percent to 1,570 rupiah, the highest since Sept. 20, and traded at 1,550 rupiah. The stock is 0.7 percent higher this year, lagging behind the Jakarta Composite Index’s 2.3 percent gain.

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmasna@bloomberg.net Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net

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

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