July 17 (Bloomberg) -- Tin exports by Indonesia, the world’s largest supplier, may exceed earlier estimates by as much as 33 percent after the government eased a quality rule, according to the country’s top producer. Futures dropped.
Sales will probably total 100,000 metric tons this year as the amended regulation will allow smelters to boost shipments, said Agung Nugroho, corporate secretary at PT Timah, which represented about 30 percent of the nation’s exports in 2012. That compares with a low of 75,000 tons estimated by President Director Sukrisno on June 18 and is little changed from 98,817 tons last year, according to data compiled by Bloomberg.
Tin tumbled into a bear market in May on concern demand may falter in China, the biggest user, and as Indonesian producers expanded exports before the new quality standards took effect on July 1. The rule was eased three days before that date, raising the maximum lead content and removing limits on some other metals. Tin content was kept at 99.9 percent, up from 99.85 percent. The new levels are sensible and will help private smelters, said analyst Peter Kettle.
“I don’t think the revised quality regulation will cause much of a problem,” said Kettle, research manager at ITRI Ltd., a St. Albans, England-based group whose members represented 60 percent of global output last year. After the “rise in exports in the first-half it is getting harder to see a fall in the full year,” he said in an e-mail on July 10.
Shipments of ingots and solder jumped 20 percent to 11,111.4 tons in June from May, data from the Trade Ministry showed July 9. That was the most since December 2011, and higher than the 9,646.7 tons in June 2012, according to data compiled by Bloomberg. First-half exports rose 16 percent to 55,011 tons compared with a year earlier.
The median of estimates from executives at seven independent smelters in Indonesia compiled by Bloomberg still showed a 20 percent drop in sales this year to 79,000 tons, the same as the median in a survey published on June 27 and the lowest level in seven years, as producers may not be able to comply fully with even the modified rules.
“The new regulations may still restrict companies’ ability to maintain exports at recent levels,” Stephen Briggs, a London-based analyst at BNP Paribas SA, said July 10. “The easing of the rules may reduce the upward pressure on the tin price, but as I expect the market to remain in deficit, I still expect a higher price in the months ahead.”
Futures for delivery in three months declined 0.4 percent to $19,378 a ton on the London Metal Exchange today. Tin, down 17 percent this year, is the worst performer on the LME after nickel. Demand for the metal, used in soldering and packaging, will exceed output this year, with ITRI estimating a shortage of 4,000 tons and Barclays Plc expecting a fourth year of deficit.
While maintaining the increase in tin purity to 99.9 percent, Indonesia tripled the maximum lead content to 300 parts per million from 100 parts per million and removed limits on other metals including cadmium and aluminum in a revised rule signed by Trade Minister Gita Wirjawan on June 28. Iron content was kept unchanged at a maximum 50 parts per million.
“We regret this as it means we’re reducing our quality again,” said Nugroho of Timah, the world’s third-largest producer. Exports of other tin products will increase because of a new physical trading rule, he said on July 8, referring to part of the regulation requiring ingots to be traded in the local market from Aug. 30 before they are shipped. For other tin products the rule is effective from Jan. 1, 2015.
The trading requirement increases costs, such as warehousing and trading fees, said M.B. Gunawan, president director at Pangkalpinang, Bangka Belitung-based smelter PT Stanindo Inti Perkasa, in a phone interview.
“I don’t understand the reason for this, if we can trade directly with our buyers, why do we need to trade through a bourse?” Gunawan said July 9. “It’s also risky, as prices can be very volatile. We’re comfortable with the way we do business but now the government is asking us to change that.”
Many smelters are halting shipments due to changes in the impurity levels and a lack of clarity on the trading rule, Gunawan said. “We need time to digest this.”
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