Tin Membership Increases at ICDX as Indonesia Targets Benchmark

Photographer: Dimas Ardian/Bloomberg News

Workers cast tin ingots at the PT Timah tin plant in Pangkal Pinang, Bangka Island, Indonesia. PT Timah, Indonesia’s largest producer and shipper, declared force majeure on exports after the rule change took effect as some buyers have yet to become members of the ICDX, which the company uses for its overseas sales. Close

Workers cast tin ingots at the PT Timah tin plant in Pangkal Pinang, Bangka Island,... Read More

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Photographer: Dimas Ardian/Bloomberg News

Workers cast tin ingots at the PT Timah tin plant in Pangkal Pinang, Bangka Island, Indonesia. PT Timah, Indonesia’s largest producer and shipper, declared force majeure on exports after the rule change took effect as some buyers have yet to become members of the ICDX, which the company uses for its overseas sales.

The only exchange in Indonesia that’s authorized to trade tin before export said that more members are joining as the government presses on with a policy to try to create a benchmark in the world’s largest shipper.

The number of members that can buy or sell the metal will rise to 24 this week from 21, according to Christilia Angelica, head of business development at the Indonesia Commodity and Derivatives Exchange, or ICDX. The government isn’t expected to change any policy right now as everything is running smoothly, Angelica said in an e-mail in response to Bloomberg questions.

Indonesia is seeking greater influence in the commodity markets where it is a significant producer, and a new rule that requires tin to be traded through a local bourse before export is aimed at displacing the London Metal Exchange. The policy change, which started on Aug. 30, spurred a rally in prices to the highest in more than six months and drained stockpiles as Indonesian shipments plunged. Southeast Asia’s largest economy accounts for about 40 percent of global tin exports.

“The move is really an attempt to give Indonesia far more control over pricing,” said David Wilson, director of metals research and strategy at Citigroup Inc. in London. “Whether it’s producers or consumers being registered at that exchange, you’ll see greater volume traded.”

Initial Shipment

The ICDX traded 190 tons of tin today, the highest single-day total since Aug. 30, according to an e-mailed statement. That raised the amount this month to 695 tons, compared with 820 tons from Aug. 30 to Sept. 30, according to bourse data tracked by Bloomberg. The first export of ingots was successful, with no errors during delivery, Angelica wrote.

Tin rose to $24,000 a metric ton on the LME on Oct. 4, the highest since March 15, and has beaten the five other main base metals this year. Futures fell 0.5 percent to $23,310 at 5:51 p.m. in Singapore as LME-tracked reserves held at 12,835 tons, the lowest since Jan. 16. The Indonesian rule changes and lower exports may create a bottleneck, according to Commerzbank AG.

“We do not expect government to change any policy for right now,” the ICDX’s Angelica wrote, saying that the new system is credible. Joining fees for smaller smelters will be waived as some producers were having a “hard time paying” the charge that could be as high as $30,000, she wrote.

PT Timah, Indonesia’s largest producer and shipper, declared force majeure on exports after the rule change took effect as some buyers have yet to become members of the ICDX, which the company uses for its overseas sales. Serumpun Tin, a group of 18 smaller producers, wants to sell output through the Jakarta Futures Exchange, which hasn’t been granted a license.

Indonesia shipped 98,817 tons of tin last year, including 9,874 tons in September, according to trade ministry data. Exports totaled 786 tons last month, the lowest since at least February 2007, when the government began monitoring sales.

PT Timah (TINS) shares rallied as much as 2.5 percent to 1,660 rupiah, the highest since Feb. 15, and closed at 1,630 rupiah. The stock has risen 5.8 percent this year, beating the 3.9 percent advance in the Jakarta Composite Index.

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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