Indonesian export rules may extend tin shortage

THE tin market is poised for a fifth year of shortages as new rules in Indonesia curb exports, driving up costs for manufacturers of everything from tablet computers to TVs to telephones.

Indonesia, accounting for 40% of global supply, introduced a rule on August 30 that refined tin must be traded on a local exchange before it can be shipped. A lack of buyers on domestic bourses and a delay in trading permits spurred PT Timah, the largest producer, and smaller smelters to halt most sales.

Exports may drop 19% this year, Timah’s corporate secretary Agung Nugroho said.

Tin prices more than tripled since 2005 as producers failed to keep pace with demand. Shortages started in 2010 and will continue into next year, Barclays says.

Futures that climbed 8% last week will rise another 6% to $24,275 a tonne on the London Metal Exchange by the end of the year, the median of six analyst estimates compiled by Bloomberg shows.

“It’s just confusion,” said Peter Kettle, the research manager at St Albans, UK-based ITRI, which is mostly funded by producers and smelters. “We expect to see significant disruptions in exports for August and September. Then we may see gradual stabilisation.”

The metal rose as much as 23% in the past two months on the London Metals Exchange, leaving it 2.4% lower for the year at $22,828.

Consumption will expand 1.8% to 344,000 tonnes this year, exceeding the 1.7% increase in production to 341,000 tonnes, according to Barclays. The bank expects a shortfall of 2,000 tonnes next year.

Output this year will be about 1,000 tonnes, or 0.3% higher than in 2009. That contrasts with a 32% jump in global sales of consumer electronics over the same period.

Purchases will rise another 4% to $1.155-trillion next year, according to GfK Digital World and the Arlington, Virginia-based Consumer Electronics Association. Solder accounts for about 50% of tin consumption.

Indonesia introduced the new regulation as part of efforts to increase the value of commodity exports and strengthen control over supply. The country toughened rules for the purity of its tin exports in July and imposed a 20% export tax on shipments of mineral ores before a complete ban is scheduled to start next year.

The government also imposed duties on palm oil and cocoa to encourage domestic processing.

“They’ve been trying in the past two to three years to export valueadded commodities,” said Wellian Wiranto, an investment strategist at the wealth management arm of Barclays in Singapore.

“In spirit that’s a good thing to do, but in terms of implementation and clarity it’s lacking.”