Tin exports from Indonesia, the top supplier, will probably plunge this quarter to the lowest in more than a year after prices declined and as the government moves to impose stricter rules on exports. Futures rose.
Overseas sales may drop 30 percent to 16,000 metric tons from 22,825 tons a year earlier, the median of estimates from one analyst and six smelters compiled by Bloomberg showed. That’s the biggest fall since the three months to March and the smallest amount since the quarter ended Sept. 30 last year, Trade Ministry data show.
Tin futures have slumped 15 percent from a six-month high in April on concern that slowing economic growth may curb demand in China, the biggest consumer of industrial metals. Prices dropped even as exports from Indonesia declined about 15 percent through September from a year earlier. The government tightened rules on trade in August last year to boost exports of higher- value products and smelters have restrained sales in an attempt to counter declining prices.
“Shipments may slow this quarter as prices have dropped to near the cost of production,” said Jabin Sufianto, chairman of the Association of Indonesian Tin Exporters in Jakarta. “Prices of about $21,000 are unattractive to some smelters,” he said in a text message on Oct. 9.
Futures advanced 0.6 percent to $20,270 a ton on the London Metal Exchange today, trimming its drop to 9.3 percent this year. They reached $23,849 on April 24 after the country required all refined tin to be traded through the Indonesia Commodity and Derivatives Exchange starting August last year, seeking to create a benchmark and challenge the role of the LME.
Indonesia will impose new standards for packaging, labeling, size and shape of tin exports to improve controls over shipments starting Nov. 1. The country accounted for 48 percent of world production, excluding China, in 2013, according to ITRI Ltd., a St. Albans, England-based industry adviser. About 90 percent of supply comes from Bangka Belitung province, where police have intensified a campaign against illegal mining to prevent environmental damage.
The new rule “will hold the key to prices,” Jabin said. “If it’s really tight, prices will probably recover.”
Jabin, co-owner of PT Eunindo Usaha Mandiri, a smelter in Riau Islands province, expects shipments will total 5,000 tons a month through the year-end. Exports from the country fell to 58,153 tons in the first nine months from 68,788 tons a year earlier, Trade Ministry data show.
“There are two regulatory factors to bear in mind,” Peter Kettle, research manager at ITRI, said by e-mail on Oct. 9. “The new strict controls on non-ingot tin from Nov. 1, which I think may finally kill the re-refining business, plus the authorities are looking more closely at sourcing of ore from illegal operations.”
The campaign against unlawful mining in Bangka Belitung has been intensified in the past two months, Maladi, a police spokesman, said in an interview in Pangkalpinang today.
“The police will continue to crack down on illegal tin mining, such as in protected forests, conservation areas and so forth,” Maladi said. “We’re targeting illegal mines. If it’s legal and they have a permit, then they can go ahead.”
For exports, Kettle predicts they will be as high as 25,000 tons in the fourth quarter with a significant proportion in December if the LME price recovers, he said.
Indonesia has 47 smelters, including 24 which are members of ICDX, the only bourse allowed to trade metal before export. Trades at ICDX in Jakarta fell 47 percent to 2,550 tons in September from a month earlier as smelters sought higher prices.
Tin production will trail demand by as much as 60,000 tons in total for the next five years because costs are still too high to encourage investment, ITRI said in an Oct. 2 report. Global output will rise 3 percent next year to 366,000 tons as demand advances 4 percent to 369,000 tons, Standard Chartered Plc said in a report Sept. 23.