* PT Timah accounts for 30 percent of Indonesian exports
* PT Timah says its customers "not ready" to join new
* Other Indonesian smelters also halt shipments
(Adds comment, detail)
By Michael Taylor and Melanie Burton
JAKARTA/SINGAPORE Sept 4 Indonesia's No. 1 tin
exporter, state-backed PT Timah, has halted shipments and
declared force majeure, blaming new trading rules and dealing a
blow to government efforts to boost the nation's influence in
Other producers are also halting exports and the move by PT
Timah will put pressure on lawmakers to revamp
regulations forcing domestic producers to trade on a local
exchange, a move aimed at allowing the world's biggest tin
exporter to establish its own benchmark pricing.
The expected shortfall is feeding into global prices, with
cash tin on the London Metal Exchange soaring to the highest
premium against the benchmark contract CMSN0-3 in 11 months on
Wednesday, reflecting concern about near-term supplies.
The new rules took effect last Friday and analysts and
traders said it was unclear how long the stand-off would last.
"The government are quite serious about it, but clearly
something has to give. Indonesia as a country need the hard
currency so there will be ultimately pressure to allow exports
of tin through other channels," said one trader at a metals
The rupiah currency has fallen to a more than
four-year low on concerns over the country's economic
performance and on expectations the U.S. Federal Reserve will
soon begin closing the tap on cheap money that has flowed into
Indonesia's producers are already grappling with a ban on
the export of tin ingots less than 99.9 percent pure that was
introduced in July with the aim of boosting the value of
Refined tin shipments from Indonesia fell to an 11-month low
of 6,465 tonnes in July, with many small producers unable to
meet the new purity levels, while Chinese buyers are turning
elsewhere for supplies of preferred low-grade tin.
Under the new rule, Indonesia's 47 registered tin ingot
exporters must trade on a domestic exchange before shipping
The Indonesia Commodity and Derivatives Exchange (ICDX)
launched the country's first physical tin contract last year and
Timah is one of five producers who have joined the exchange.
Timah's corporate secretary Agung Nugroho said the company
had been forced to declare force majeure because its customers
had not registered with the exchange.
"We have to trade our tin in an Indonesian exchange, the
ICDX, and customers can only buy our tin if they become a member
first. They are not ready to be a member," he said.
Trade ministry officials did not respond to requests for
comment. The ICDX chief executive said he was unable to give an
Timah accounts for about 30 percent of Indonesia's total
refined tin exports, which rose almost 3 percent in 2012 to
Although force majeure usually only applies to acts of
nature, the producer recently changed its contract terms to
apply under Indonesian law. The firm included a clause that
stipulated it could call force majeure if regulator changes
affected their usual shipments.
Muddying the picture further, a group from Indonesia's main
tin-producing Bangka-Belitung region have refused to register
with the ICDX exchange. The group of 18 smelters, who want to
trade on the Jakarta Futures Exchanges (JFX), have halted
exports for three months or until the government approves a
WAIT AND SEE
Traders said problems surrounding the logistics of delivery,
counterparty risk and the mechanics of the ICDX contract were
behind its lack of traction with buyers.
Customers of Indonesian tin producers were taking a
wait-and-see approach on the stand-off to determine how hard the
Indonesian government would push on the new rules given it has
rowed back on some areas in the past, they said.
"People have been sceptical in the past and the reality is
that (the government) have rolled back," said Singapore-based
Barclays analyst Sijin Cheng. "There is an upside risk, but I
think they are right to be sceptical."
A prolonged dispute would hit the tin market.
"There is only one (contract) at the moment ... and that's
not working. They are fixing some of the latest issues but far
less material will come out of Indonesia. And that certainly is
going to have a big effect on the tin market," said the trader.
Three month tin prices on the London Metal Exchange
rose 1.6 percent on Tuesday, and were last trading down 0.34
percent at $21,500 a tonne.
(Additional reporting by Yayat Supriatna in Jakarta; Editing by