Indonesia tin output to recover to 90,000 T in 2014, says ITRI
PANGKALPINANG Indonesia Dec 11 (Reuters) - Tin output in Indonesia will rebound by as much as 6 percent to 90,000 tonnes next year, industry group ITRI said on Wednesday, as teething problems associated with a new trading regulation in the world's top exporter are ironed out.
Indonesian tin exports plunged from September, after the Southeast Asian nation made it mandatory for all exporters to trade on a domestic exchange before making shipments, in a bid to stop illegal mining and gain greater control over prices.
Although the new rule was blamed by state-owned producer PT Timah for it declaring force majeure on Aug. 30, November exports jumped nearly 30 percent to more than 5,000 tonnes, indicating the worst may now be over.
Top Indonesian tin exporter Timah's force majeure will remain in place until at least the end of the year, it has said, but it expects tin sales to rise by more than a fifth in 2014.
Indonesia's total tin output will fall by as much as 13 percent this year to 85,000 tonnes to 86,000 tonnes, Peter Kettle, manager of market studies at ITRI told Reuters on the sidelines of a tin forum. Output would recover next year to about 90,000 tonnes, he said.
"For a couple of months there was a sort of stand-off, with people hoping for another change in the regulation," said Kettle on the new domestic trading rule.
"But now people have accepted that it is a fact of life ... You won't have the big disruption you had this year over a couple of months, and also prices will be a bit higher."
The ITRI forecast would still put tin output next year at around 9 percent less than the 98,820 tonnes produced in 2012.
While Indonesia's monthly tin exports are showing signs of improvement, so too has the percentage of shipments of tin solder, which almost doubled in November from October to account for 1,544 tonnes of the month's 5,193 tonnes total.
Unlike tin ingots, tin solder will not be subject to a domestic trading rule until January 2015.
"It is something that has to be monitored," said Kettle, when asked if turning ingot into solder was a way around the trade regulation for some Indonesian smelters. "That is a loophole that people will have to look at."
A steady growth in tin membership at Indonesia's only approved tin bourse, the Indonesia Commodity and Derivatives Exchange (ICDX), has help to ease the global supply squeeze.
ICDX had 33 tin members, including 14 buyers and 19 sellers as of Dec. 10, with an additional 14 membership applications being processed by the exchange.
The list includes Amalgamet Pte Ltd, a sister company to London Metal Exchange ring dealer Amalgamated Metal Trading. Both are units of the London-headquartered AMC Group.
To offer greater market confidence, ICDX could give freer access to its trading volume data and impose stricter enforcement of its certificate of origin system, Kettle added.
Although ICDX currently runs a physical tin contract, it is planning to offer tin futures next year.
LME tin prices steadied near $22,600 a tonne on Wednesday, up from two-month lows hit the session before.
The most liquid ICDX contract traded last at $23,140 a tonne.
Last month, ITRI forecast a 12,400 tonnes global deficit for 2014, with prices to average $26,000 per tonne.
"Things are gradually falling into place and people are experimenting as they go along," said Kettle about the price disparity between ICDX and LME tin prices.
"The ICDX quality is a higher standard than the LME so you would expect it to be at a bit of a premium."
He added: "The ICDX could be a bit more stable than the LME because you don't have the influence of the investment funds buying and selling in big volumes, but overall they should (eventually) move closer together." (Additional reporting by Yayat Supriatna in JAKARTA and Melanie Burton in SINGAPORE; Reporting by Michael Taylor; Editing by Tom Hogue)