Tin buyers eye Indonesian exchange after rule change
* PT Timah and 18 other tin smelters stop exports
* Tin buyers have wait-and-see approach to new trading rules
* Asian tin traders say there is no panic for supplies
By Michael Taylor and Melanie Burton
JAKARTA/SINGAPORE Sept 5 (Reuters) - Indonesia's only regulated tin exchange said it is fielding calls from potential buyers of the metal after new trading rules forced a top producer to stop shipments last week, but others said they will sit out for now.
"We have seven buyers and more coming up," Megain Widjaja, chief executive of the Indonesia Commodity and Derivatives Exchange (ICDX), told Reuters. "There are so many phone calls that I need to take from the last two days, from buyers who wish to get onboard and get tin ASAP.
"There are many rumours saying that this is not going to work, but guess what? It works."
Indonesia's No. 1 tin exporter, PT Timah halted shipments last Friday, blaming new government regulations that force tin ingot exporters to trade on a local exchange before shipping, part of a broad range of reforms in commodities ranging from palm oil to minerals.
The move has led to uncertainty about tin exports from Indonesia, the world's biggest exporter, as other producers have also halted shipments, although traders said ample stocks of the metal were muting any market impact.
State-owned Timah, which accounts for about 30 percent of Indonesia's tin exports, declared force majeure to free it from contractual obligations, saying it had to take the step as its customers had not registered with the exchange.
ICDX's Widjaja said the move by Timah had sparked a rush of membership inquiries from buyers who may have doubted whether the new trading rules would be enforced and had taken a "wait and see" approach.
Tin buyers in talks with ICDX included Glencore, Trafigura, RJH Trading and Wilhelm Grillo Handelsgesellschaft, he said.
Several tin dealers in Asia said they had no plans to trade on the exchange yet, even if they joined up, while a trader from one of the companies Widjaja referenced said the company would consider joining if there was no other option.
"We are in the registration process but we have no plans to trade," said one source at a merchant in Singapore.
Currency risk was a big issue, he said, given the mismatch of daily pricing of the Indonesian contract to global benchmark LME official prices.
"That must make the trading of the metal next to impossible - you'd spend 60-70 percent of your income hedging the currency and hedging tin as well," he said.
Ample regional stocks, low demand from China, which has restocked over the past few months, and India, where consumers face a falling currency, meant there was no incentive to buy.
"We are not seeing any panic customer calls," he added.
Another trader in Singapore said his trading house had no plans to sign up to the exchange.
"(The contract) needs very high margin deposit and for every trade, commission is very high and also the liquidity is very very low," he said. "We can wait six months."
Tin buyers currently registered with ICDX are 3H CO.,LTD., Daewoo International Corporation, Gold Matrix Resources, Great Force Trading, Noble Resources International, Purple Products Pvt. Ltd and Toyota Tsusho Corporation, Widjaja said.
Indonesia's total refined tin exports rose almost 3 percent in 2012 to 98,817 tonnes. The new trading rule would cut between 2,000-3,000 tonnes of tin ingot shipments a month for the rest of the year from Timah, corporate secretary Agung Nugroho said.
The shortage has pushed cash LME tin prices to the highest in three years against the benchmark contract, but so far it hasn't spilled into the phsyical market, traders said.
The uncertainty surrounding tin shipments comes less than two weeks after Indonesia's government unveiled a fiscal package to promote foreign investment, reduce imports and quotas and prop up its tumbling rupiah currency.
Trade ministry officials were unable to give immediate comment on Thursday.
Creating further uncertainty, the rival Jakarta Futures Exchange (JFX) plans to launch a tin contract with the support of 18 of the country's 47 registered tin exporters.
The government wants only one exchange to help build liquidity and establish an Indonesian benchmark price.
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