Ongoing spat ruins tin market dream
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As the world’s biggest tin exporter, Indonesia has been fighting to exert its influence in the global market by attempting to set benchmark pricing through the Indonesian Tin Market (Inatin) — a direct challenge to the domination of the London Metal Exchange (LME).
Little more than five months since its establishment in February, the tin market has fallen into complete disarray as local industry players bicker and betray initial commitments.
Inatin, a physical market with auction processes carried out at the Indonesia Commodities and Derivatives Exchange (ICDX), has largely been inactive and recorded zero deal settlements over the last two months.
According to ICDX data, the last deal was made on June 5 for tin at a price of US$20,830 per metric ton. Inatin saw its biggest transaction on Feb. 27 with 20 lots agreed to at $24,150 per metric ton. The highest price was recorded at $25,550 on Feb. 13.
Conflict between tin producers has marred Inatin’s development since its inception. The Indonesian Tin Association’s (ITA) executives withdrew their support following the removal of the association’s top executive.
Several local tin producers have also refused to join the tin market, claiming it was too Jakarta-centric and failed to represent the interest of producers in the Bangka-Belitung islands, the largest producer of tin in Indonesia.
Since February, Inatin has only registered nine members out of the 28 companies in ITA, including Indonesia’s largest tin producer, PT Timah. The central government controls a 65 percent stake in Timah, while the remaining shares are held by the public.
Of the nine companies, only Timah and its subsidiary, PT Tambang Timah, sold their products through the tin market, according to Syahrul Sempurnajaya, the head of the Commodity Futures Trading Supervisory Board (Bappebti).
Syahrul said that Timah representation was expected to be able to generate support for the tin market.
“PT Timah is the country’s main producer. However, we recently saw that the company’s management was changed and remained unable to take on that role. Meanwhile, other companies sell their tin outside Inatin and are able to sell their products overseas, particularly to Malaysia and Thailand, because the regulation banning exports has yet to be completed,” Syahrul said.
The government is planning to fully implement its ban on the export of unprocessed tin and other raw minerals in 2014.
“We must unite and no longer export raw materials so that the tin market can be effective,” Syahrul said.
Policymakers in Jakarta are increasingly wary of weakening commodity prices brought on by the global economic slowdown and thus hope to bolster Inatin’s designated role as a global reference, a dream largely shared by most producers.
The country’s tin producers tried to disrupt tin supplies by curbing shipments last October in an attempt to drive prices higher. However, the plan fell apart only months later.
Several tin smelteries in the country have recently halted production and others have scaled back operations after prices fell to a new low. Three-month delivery tin was unchanged at $18,200 per ton on the LME at 1:30 p.m. Jakarta time. The metal’s price has fallen 20 percent over the past year.
Trimming shipments is expected to halt the further fall in tin prices as Indonesia’s tin accounts for about 40 percent of global exports. According to figures from the Trade Ministry, the export of refined tin stood at 8,298.47 metric tons in July, falling 14 percent from 9,646.68 tons a month earlier.