Indonesia may curb tin exports

Indonesia, the world's second-largest tin producer, may impose a quota on exports in an effort to keep the metal above $12,000 a tonne, an official said.

Tin for delivery in three months on the London Metal Exchange, which peaked at $13,975 a tonne on February 22, gained as much as $160, or 1.2 per cent, to $13,460 a tonne, and traded at that level at 10:23 am London time.

The proposed move would keep the global market from being oversupplied, Mangantar Marpaung, the director for coal and geothermal development at the energy and mineral resources ministry, said in Jakarta today.

The Southeast Asian nation has been placing curbs on illegal mining to reduce tin supply, and last month ordered miners to register for the right to export the commodity. The price of tin, which is used in soldering, has surged to its highest since at least 1989 amid the crackdown.

A target of $12,000 "is a very high price relative to historical levels,'' Ahmad Solihin, an analyst at PT Mandiri Sekuritas, said. "It can induce production in other parts of the world.''

"We think that $12,000 a tonne is the appropriate price for tin,'' Marpaung said in a telephone interview.

"At $8,000 a tonne there isn't enough funds for land reclamation after mining, and to ensure work safety.''

The quota may be imposed at the provincial level, he said, without giving details. All of Indonesia's tin comes from mines in Bangka Belitung province near Sumatra island.

"Any move to introduce quotas that lead to a short-term drop in production would be supportive of the price,'' Neil Buxton, managing director of London-based GFMS Metals Consulting, said.

Historically, quota systems hadn't been successful in encouraging higher prices in the long term, he said.

Tin may rise to $20,000 a tonne if supply from Indonesia falls to less than a forecast 90,000 tonne this year, Peter Kettle, manager for statistics and market studies at ITRI, said yesterday. The group, formerly known as the International Tin Research Institute, is funded by producers of the metal and has analysed the tin market for 74 years.

Last month, ITRI and commodity analysis company CRU said in a joint report that Indonesian output will drop by about 30 per cent to 90,000 tonne in 2007. Only China produces more of the metal than Indonesia.

After the imposition of the export-licence requirement, only state-linked PT Timah, the country's largest tin miner and smelter, has secured permission to ship the metal overseas.

PT Koba Tin, the second-largest miner, and other smaller melters have applied for licences. Koba Tin is 75 per cent owned by Malaysia Smelting Corp, and 25 per cent held by Timah.

Indonesian police have been probing allegations Koba Tin has been using ore from illegal miners, and has arrested three of the company's executives. The company has denied wrongdoing.

The changes to the management of Indonesia's tin industry come as the government has been weighing a host of additional measures to try and boost the value of the nation's commodity exports. Aside from tin, the Asian country is home to major deposits of other mineral ores, including copper, nickel and gold. It is also the world's second-largest producer of palm oil, the world's most traded vegetable oil.

Trade Minister Mari Pangestu said on February 1 that the laws on unprocessed commodity exports were under review. The reassessment was meant to help to "increase value-added for our exports,'' Pangestu said on February 27.