Weather, ore limits restrain Indonesia tin output

(For a factbox on Indonesia’s tin industry click on [ID:nJAK439733])

JAKARTA/PANGKALPINANG, May 11 (Reuters) - Few tin smelters in Indonesia, the world’s top exporter of the metal, will be able to crank up output to exploit higher prices because wet weather and depleting reserves have crimped access to ore, industry officials said on Monday.

Last week the price of tin, used in food packaging and soldering of electronic components, surged to a near six-month high at $14,249 a tonne, driven by shortcovering and fund buying.

However, prices of the silvery, malleable metal MSN3, which stood at $14,000/14,050 a tonne on Monday, remain 44 percent below an all-time high of $25,500 a tonne struck in May 2008.

Smelters in the Bangka-Belitung islands, Indonesia’s main source of tin, said supplies of raw material were limited.

“It’s getting more difficult now to mine tin because reserves are depleting,” Patris Lumumba, director of PT Bangka-Belitung Timah Sejahtera, a consortium of 7 small smelters, told Reuters.

“We are keen to increase production as prices are recovering...but we don’t have enough raw material,” he added.

He said miners now had to dig down to 20 m (66 ft) to find tin ores, compared with 5-8 metres in previous years.

PT Bangka-Belitung Timah Sejahtera is now operating 30 to 40 percent below its capacity of 5,000-6,000 tonnes of refined tin per month.

Wet weather has also crippled operations of many small miners in the islands, particularly in remote areas, as they could not collect raw material, a tin ore merchant said.

PT Koba Tin, which is 75 percent-owned by Malaysian Smelting Corp. MSCB.KL is also unlikely to increase its output this year despite the improved prices.

“We don’t have any plans to increase production because rains have flooded one of our mines and our reserves have depleted,” Koba Tin spokesman Darmansyah said by telephone from Bangka.

Koba Tin has said it plans to produce around 9,000 tonnes of refined tin this year, up from 7,109 tonnes in 2008, but Darmansyah said the target could be revised down in the second half.

Koba Tin has a total mining area of 41,000 hectares (101,300 acres) with sufficient tin reserves to last until its work contract expires in 2013, the firm said in a statement.

PT Timah TINS.JK, the world's largest integrated tin miner, also has no plan so far to change its production target for this year at 45,000-48,000 tonnes made last month.

“Tin prices have only recovered recently. We don’t have any plan yet to revise our annual plan,” said Timah spokesman Anhar Ramli in Bangka. “Beside, we already have annual supply commitments.”

PT Timah’s refined tin output fell 9 percent in the year’s first quarter to 10,462 tonnes from 11,523 tonnes last year, thanks to falling tin ore production in its onshore mines.

Tin ore production from onshore mines fell 56 percent to 2,722 tonnes of tin-in-concentrate, from 6,178 tonnes tin-in-concentrate in the January-March period in 2008 as many small miners had not yet resumed operations due to low prices.

Timah also sources tin from small miners that are permitted to operate in its concession.

The firm planned to boost offshore mining in a bid to increase tin reserves by increasing its fleet of dredges. It currently sources 30 percent of its tin ore from offshore mining while the bulk comes from onshore mining.

The government has said tin production by Indonesia, the world’s second-biggest producer after China, may not reach 90,000 tonnes this year although it had initially planned to cap production at 105,000 tonnes. (Editing by Ed Davies and Clarence Fernandez)