ICDX tin contract attracts interest ahead of Jan launch -govt

JAKARTA, Dec 8 (Reuters) - Four big commodity traders and three Indonesian tin producers are readying to trade a soon-to-be launched physical contract for the metal, a trade ministry official said, offering hope the new contract will secure enough liquidity to make it a success.

Smelters in Indonesia’s main tin producing region of Bangka island have talked about establishing a Bangka-Belitung tin market for many years, as they look to give domestic producers a greater say in global prices.

Last month such talk became reality, after the Indonesia Commodity & Derivative Exchange (ICDX) said material for a physical tin contract -- due to be launched in early 2012 -- would be supplied by members of the Indonesia Tin Association (ITA).

The ICDX will launch its physical tin contract on Jan. 15 next year, Syahrul Sempurnajaya, head of the commodity futures trading regulatory agency (COFTRA) at the trade ministry, told Reuters.

“The three tin producers who have been ready to trade their tin on the Jakarta physical tin market are PT Timah, PT Koba Tin and PT Bukit Timah,” Sempurnajaya said on Wednesday.

He added that the four tin traders looking to use the tin contracts were Mitsubishi, Toyota , Noble Group and Credit Suisse.

Metal analysts are sceptical that an Indonesian tin contract could rival the decades old benchmark London Metal Exchange (LME) contract or attract liquidity.

The new physical tin contract will trade in lots of 5 tonnes per lot, for 15 minutes each day, from 0230 to 0245 local time, Sempurnajaya said.

“We will have remote trading on physical tin contracts, with physical settlement at PT Timah’s warehouses in Muntok, Bangka, and at two other delivery sites in Jakarta and Surabaya.”

The ICDX will limit daily volumes to 600 lots only or 3,000 tonnes per day only, Sempurnajaya said.

The LME was established more than 130 years ago. London tin was first traded in 1877 and is used as a benchmark price for most consumers, traders and producers worldwide.


Indonesia, the world’s top refined tin exporter, has a track record of supply issues that attempt to impact prices -- with limited success.

“We have to weigh the arguments,” said Daniel Briesemann, a Commerzbank analyst, of the new tin contract. “On one hand, yes Indonesia is by far the most important tin exporter in the world so it has to at least have market power.”

“On the other hand, if you take a look at the LME tin contract, the volume there isn’t really high either,” he added. “It will take time before such a contract in Indonesia will establish itself.”

The ITA, an industry group of 28 smelters, stopped shipments from Oct. 1 in an effort to push benchmark tin prices above $23,000 a tonne. ID:nL4E7MN1AL]

Tin traded at $20,400 a tonne on the London Metal Exchange by 0502 GMT. The metal, mainly used in solders for electronics, touched a record high above $33,000 a tonne in April.

Since Oct. 1, London tin prices have been little changed, although LME tin inventories are at 11,925 tonnes, compared to more than 20,000 tonnes at the end of September. <0#LME-STOCKS>

At the time the shipping stoppage was announced, analysts were unconvinced that it would hold.

Smelters in Southeast Asia’s largest economy began to seriously breach the self-imposed export stoppage late last month, after government data showed a surprise rise in monthly tin exports for October.

“If you take the whole export ban plan ... that Indonesian tin producers are trying to put through without success, I would doubt such a new tin contract in Indonesia would be accepted quickly,” added Briesemann.

“Maybe not decades, but a few years.”

There are 39 tin smelters approved by the Indonesian trade ministry to export refined tin. Exports totaled 92,487 tonnes last year and 99,287 tonnes in 2009, trade ministry data showed.

From January to November, Indonesia’s refined tin exports were 80,917 tonnes. (Reporting by Yayat Supriatna and Michael Taylor; Editing by Clarence Fernandez)