Tin Output at World’s Top Exporter May Shrink to 14-Year Low

  • Environmental concerns, low prices deter miners in Indonesia
  • Smelters producing at low capacity due to tight ore supplies

Tin production in Indonesia could slump to a 14-year low as weak prices and government regulations curb mining in the world’s largest exporter.

Output of the refined metal, used in cans and circuit boards, may fall to 60,000 metric tons this year, according to PT Timah, which accounts for about half Indonesia’s total. That’s a decline from 67,350 tons in 2015 and would be the lowest since 58,794 tons in 2002, according to data from the World Bureau of Metal Statistics.

The government has imposed restrictions on production and overseas sales, tightened up on taxation and quality standards, and obliged exporters to trade the metal on a local exchange before shipping. Smelters in Indonesia are running at low capacity as ore supplies tighten due to a decline in prices and the government’s curbs, said PT Timah Corporate Secretary Agung Nugroho.

“The various new regulations since August 2013 have made it more and more difficult for smelters unable to produce high quality metal and/or without access to proper mining leases to survive,” Peter Kettle, research manager at industry group ITRI, said by e-mail from London. He estimates that Indonesian output may fall to 62,000 to 63,000 tons this year. The lesser number would also be a 14-year low while Indonesia produced 63,000 tons in 2013.

Jabin Sufianto, head of the Association of Indonesian Tin Exporters, said he expects production to reach 66,000 tons this year.

Environmental Concerns

Indonesia raised the purity standard on tin in July 2013 and in August the government ordered dealers to trade ingots for export on the Indonesia Commodity and Derivatives Exchange before shipping. Environmental concerns have also taken their toll. In February, the second-biggest smelter, PT Refined Bangka Tin, said it had ceased operations on environmental grounds, while PT Timah halted offshore mining in January in response to complaints from local fisherman.

Tin traded on the London Metal Exchange is at $16,755 a ton, up 15 percent on the year but only about half of its 2011 peak of $33,600 a ton. The metal slumped 25 percent in 2015 as demand slowed in China, the world’s biggest metals user. “It’s hard to produce tin at prices of below $17,000,” said Timah’s Nugroho.

“Supply cuts from Indonesia will definitely support tin prices, although it’s been a trend for a while that Indonesian production is falling,” said Wu Xiaofeng, an analyst with Shanghai-based consultancy SMM Information & Technology Co. “Global supply and demand is generally balanced with a slight tightness. We haven’t seen major supply cuts from China or Myanmar, and no significant demand pick-up is expected, so we expect the impact to be limited.”

The nation’s smelters are running at about a fifth of total installed capacity, Mochtar Husein, inspector general at the Energy and Mineral Resources, said earlier this week. Currently, only 29 of 47 plants are operational, he said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE