March 14 (Bloomberg) -- Tin output in Indonesia may be disrupted by prolonged dry weather in the main producing area of the world’s largest exporter, adding to signs that the lack of rain across the country is hurting commodity production.
Bangka Island has been very dry since late December, said Anton Salim, head of production at PT Refined Bangka Tin, the biggest private smelter in Indonesia. The open-pit mines that supply ore to smelters need a lot of water for digging up and separating the raw metal from mud, according to Toto Hermawan Liem, president commissioner at PT Bangka Tin Industry.
Tin, used in smartphones and televisions as solder, is the top performing base metal after nickel in 2014 on forecasts that global demand will exceed supply for a fifth year and concern shipments from Indonesia may decline. The Bangka and Belitung islands, which account for about 90 percent of exports of tin from Indonesia, are located off Sumatra Island, where the dry spell is also seen hurting palm oil supplies.
“Now it’s very hot and dry, water is absorbed and evaporated faster,” PT Refined Bangka’s Salim said in interview in Sungai Liat, Bangka on March 12. “Weather anomalies really are a major problem.”
Tin smelters in Bangka and Belitung including PT Refined Bangka use ore that’s dug up from open-pit mines on land as well as dredged from the seabed offshore. The islands’ weather is normally rainy from December through March, said Salim.
Tin futures advanced 2.7 percent to $22,950 a ton on the London Metal Exchange this year. Cash tin may advance to $26,000 a ton in 2014 and $30,000 next year, Barclays Plc said in a Jan. 13 report, forecasting the fifth year of deficit as world demand tops supply by 5,000 tons.
At present, PT Bangka Tin Industry is getting only about 100 tons of ore a week from inland mines compared with the normal level of about 175 tons, said Liem.
PT Refined Bangka is increasing supplies from offshore mines and raising stockpiles to try to maintain output, said Salim. The company aims to boost exports 50 percent to 9,000 tons this year, depending on supplies and prices, he said.
The dry spell may raise fuel costs for pumping in water especially for mines that are located far from water sources, said Yuri, production head at PT Bukit Timah, who gave only his first name in an interview.
PT Timah, Indonesia’s biggest producer, has seen no disruption from the dry weather so far, and is still operating normally, said Corporate Secretary Agung Nugroho. Output was 23,718 tons last year, the company said on Feb. 17.
PT Timah, PT Refined Bangka, PT Bangka Tin and PT Bukit Timah are members of the Jakarta-based Indonesia Commodity and Derivatives Exchange, the only bourse in the country that’s allowed to trade refined tin before export.
Global tin demand was 344,000 tons in 2013, beating production of 341,000 tons, according to Barclays, which says the metal’s outlook is bullish. Exports from Indonesia totaled 91,612 tons last year, according to the government.
The dry weather in Indonesia and other parts of Southeast Asia boosted palm oil prices in Kuala Lumpur this month to the highest level since 2012 on concern harvests may drop. Indonesia and Malaysia are the world’s two largest producers.
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