Thirty tin smelters in Indonesia, the world’s largest exporter, agreed today to start trading the metal on a local exchange to comply with a government rule that comes into force this month.
The smelters will begin trading in early September with about 100 importers on the Jakarta Futures Exchange, which will introduce a dollar-denominated and electronically-traded contract on Aug. 28, said Tjahyono Mukmin, president director of the Serumpun Tin trading board. That will replace bilateral dealings between producers and importers.
Indonesian smelters are backing local exchanges to try to establish an alternative to the benchmark on the London Metal Exchange. The government, which enforced new purity standards last month, also ordered that ingots for exports must be traded locally from Aug. 30. Four producers, including the country’s biggest PT Timah, started trading the INATIN contract on the Indonesia Commodity and Derivatives Exchange last year. The country has a total of 47 producers registered as exporters.
“This will change smelters’ trading to electronic trading,” M. Bihar Sakti Wibowo, director of the Jakarta Futures Exchange told reporters today in Pangkalpinang, Bangka Belitung, the main producing area. “Sellers will put offers and their brands on our trading system and buyers can bid.”
The tin contract, which will be quoted in U.S. dollars, covers 5 tons of metal with purity of 99.9 percent and traded in three sessions starting from 10 a.m. to 11 p.m. Jakarta time, according to a statement distributed to reporters today.
Trading in local exchanges will not “change the pricing fundamentals,” said Feng Juncong, an analyst with China’s state-owned Beijing Antaike Information Development Co. “Major smelters are used to reaching contracts with their clients on the basis of the LME prices.”
Futures for three month delivery traded at $21,899 a metric ton on the LME at 5:07 p.m. in Jakarta. Prices have risen 7.4 percent this month as Indonesian exports plunged 42 percent to 6,466 tons in July when the new purity standards came into force, raising the minimum tin-content limit. That’s the biggest drop in shipments since January 2012.
“The main purpose for Serumpun Tin is to create competitive and transparent prices,” Mukmin told reporters in Pangkalpinang today.
The smelters that will trade Serumpun Tin include CV Serumpun Sebalai, PT Bukit Timah, PT Bangka Belitung Timah Sejahtera and PT DS Jaya Abadi, said Mukmin.