JAKARTA, Aug 16 (Reuters) - At least six producers in Indonesia’s main tin mining hub of Bangka Belitung have cut exports on the grounds that current global prices for the metal are too weak, company executives said.
Indonesia is the world’s top tin exporter, but with current low demand thinning producers’ profit margins to below cost, there may be further disruptions to shipments, officials said.
“They have stopped tin exports because prices are far below the economical level. We think that the price level that is conducive for export is at least $25,000 per tonne,” Johan Murod, the CEO of Babel Tin Group, told Reuters.
The benchmark London Metal Exchange (LME) tin contract has recovered nearly 7 percent from a one-year low in July, and was trading at around $18,000 a tonne on Thursday.
Last week, top tin exporter Timah said it was holding back on spot sales. The stoppage will continue until “prices are high enough to cover operational costs,” the company’s corporate secretary, Agung Nugroho said on Thursday.
Unlisted Koba Tin, a joint venture between Malaysia Smelting Corporation and PT Timah, said it hadn’t placed any restrictions on exports, but was producing less because of the low prices.
Tightening tin supplies may help insulate the soldering material’s prices from the impact of a slowing economy in China, the world’s top consumer of the metal, industry sources say.
Sukito Gunawan, the director of the DS Djaya Abadi tin smelting company, said pricing tin ingots had become risky for his business because of falling margins.
“The market is pretty weak in Europe and also China is slowing down, so traders aren’t too keen to stock up.”
He said there was usually a decline in production during the Muslim fasting month of Ramadan, which ends next week, so output could pick up in coming weeks.
Total 2011 exports of tin, mainly used in soldering for electronics, rose almost 4 percent to 96,019.76 tonnes and currently stand at 55,613.52 tonnes for this year.
There are the 44 registered tin smelters in Indonesia.
Cutting shipments may not increase prices unless there is a coordinated effort by Indonesia’s tin industry, said David Wilson, director of metals research at Citi Investment Research & Analysis.
“Given demand is pretty weak at the moment it doesn’t seem to be amazingly supportive at the moment. I think we’d need to see some fairly big falloff in refined tin exports from Indonesia to see some price reaction,” Wilson said.
“If prices continue to bumble along at current levels we might see some more coordinated moves,” Wilson said.
The Indonesian tin association initiated an export stoppage late last year in an effort to boost prices, though some members started shipping again, leading to disputes within the group. (Additional reporting by Yayat Supriatna and Michael Taylor; Editing by Neil Chatterjee and Anthony Barker)