Timah forecasts tin prices will recover on higher demand

State-run PT Timah, the world’s largest tin exporter, has forecast that tin prices will regain lost ground next year on bullish demand.

Timah president director Wachid Usman said on Monday that the metal’s price might average US$23,000 per ton next year, up from October’s price of just below $20,000.

“We’ve seen that the stock position is slightly below the normal, but we haven’t seen reduced orders from our buyers. The demand will remain and the price will rise next year on Asian demand,” Wachid said during a public disclosure.

The tin price reached its lowest point this year, about US$17,000 per ton, in September after hitting a record high of more than $36,000 in April following concerns about the euro debt crisis and lingering economic slowdown in the United States, according to Timah.

The company is expecting sales of 35,500 metric tons by the end of the year, which would be 12.3 percent down from the 40,497 metric tons sold in 2010.

Sales during the first nine months of the year also declined by 14 percent to 25,266 metric tons from 29,252 metric tons in the same period last year.

Wachid said the decline was triggered by the company’s move to adjust sales following a recent deal among domestic tin producers to halt export, starting on Oct.1 until the end of year, in response to the declining price.

But despite the deal, Timah said it remained committed to exporting tin to buyers whom the company already had contracts with.

“We still have delivery contracts amounting to about 8,000 metric ton of tins by the end of the year. However, certainly, our sales volume will fall because we are no longer selling in the market,” Wachid said.

Unlike contract sales, the spot market requires a company to sell its product for cash and immediate delivery.

Timah commercial and business development director Gatot Hari Prasetyo said the company would expect to achieve bigger margins in contract-based sales if tins prices recovered to $24,000 per metric ton.

“If we carry out sales on the spot market now, with a price range of $21,000 to 22,000, we will get a slight margin. With a bigger margin from contract-based sales, we hope our net profit by the end of the year will be at least the same as last year’s,” Gatot said.

Timah recorded a net profit of Rp 947.94 billion (US$105 million) for 2010. The company reported a net profit of Rp 859.84 billion as of the third quarter of 2011.

The company sold tin for an average price of $28,440 per metric ton during the first nine months of the year, 57 percent higher than during the same period last year, which was $18,133 per metric ton.

Around 55 percent of the company’s sales went to the Asian market, particularly to Japan, South Korea, Singapore, China and Taiwan. European countries and the United States absorbed about 35 percent and 7 percent of Timah’s total sales, respectively, last year.

Meanwhile, the domestic market accounted for 3.34 percent of the total sales.

“The 2011 distribution figures are not far different from 2010,” Gatot said.

Shares in Timah closed at Rp 1,900 on Monday, up 0.53 percent from Rp 1,890 on Friday. (rcf)