Tin exports from Indonesia, the world’s largest shipper, plunged to the lowest level in at least six years as a new rule requiring that the metal be traded on a local exchange before shipment restricted cargoes.
Shipments of the metal used in smartphones and packaging fell 88 percent to 786 metric tons last month from August, data from the Trade Ministry showed today. That’s lowest since at least February 2007, when the government began monitoring sales. Exports in September were lower than the 3,000 tons seen by PT Timah last month, and the 9,874 tons shipped in September 2012.
Tin rallied to a six-month high in London last week after the policy took effect and smelters curbed exports, with only one exchange in Jakarta authorized to trade ingots before export. The rule is aimed at helping Indonesia displace the London Metal Exchange as the venue for setting the benchmark price, according to the Commodity Futures Trading Regulatory Agency. Tin has the best outlook among the six main industrial metals because of global shortages, said Standard Bank Group Ltd.
The rule’s “objective is how we can create a reasonable price,” Sukrisno, president director at PT Timah, said in an interview on Bloomberg TV Indonesia today, before the trade data was released. Timah, based in Pangkalpinang, Bangka Belitung, is Indonesia’s largest tin exporter, and the company declared force majeure on shipments last month as some customers had yet to adapt to the new regulation, which took effect on Aug. 30.
Tin for delivery in three months declined 2.1 percent to $23,500 a ton on the LME at 4:24 p.m. in Jakarta. Futures advanced 5.5 percent to $24,000 a ton on Oct. 4, the highest price since March. Tin has outperformed the five other main base metals on the LME over the past 12 months, including copper, aluminum and nickel.
“We have found it quite a challenge to get high-purity tin,” said Chen Tien Yue, executive director at Kuala Lumpur, Malaysia-based Royal Selangor International Sdn Bhd., where tin accounts for an average of 50 percent of the production cost of its pewter products. “The reduction in supply has clearly been pushing the prices up.”
Exports from Indonesia in September comprised 400 tons of ingots and 386 tons of solder, according to ministry data based on surveyors’ reports. Sales in the first nine months of the year fell 3.3 percent to 68,788 tons compared with the same period a year earlier, Bloomberg calculations show.
At present, only the Indonesia Commodity and Derivatives Exchange in Jakarta, or ICDX, is allowed to trade tin ingots before export from Southeast Asia’s largest economy. The commodity-trading regulator hasn’t approved a proposal from the Jakarta Futures Exchange to trade another tin contract, said Deputy Trade Minister Bayu Krisnamurthi today.
Refined tin will be in deficit through 2016, while copper, aluminum and zinc are oversupplied, Standard Bank said in a report today. Stockpiles of tin in warehouses tracked by the LME dropped 13 percent last month, the biggest loss since January 2012, and stood at unchanged 13,195 tons today.
Royal Selangor buys tin from the LME through spot and forward contracts, and takes delivery from the LME’s warehouses in Johor, Malaysia, said Chen. That matches the company’s requirements as its plant is in Kuala Lumpur, within trucking distance from Johor, said Chen.
The Indonesian policy change is part of wider government efforts to boost the value of commodity shipments. The rule applies to ingots at present and will be extended to other tin products such as solder from 2015.
“Timah’s sales volume may drop this year but that’s fine,” said Sukrisno. “Our stockpiles will increase and prices will also gain. Hopefully, tin can reach $25,000 by December,” he said, calling on other producers to join the ICDX.