July 20, 2015 / 7:40 AM / in 3 years

Indonesia tin smelters face credit squeeze over shipment failures

* Firm fails to deliver some shipments, say customers

* Indonesia’s tin smelters shrink to 22 from 37 in 2014-industry

By Melanie Burton and Michael Taylor

MELBOURNE/JAKARTA, July 20 (Reuters) - Indonesian tin smelters are finding it harder to get credit from banks and trading houses after a Singapore-based firm failed to deliver some shipments, in a further blow to an industry reeling from a slump in prices.

More than a third of Indonesia’s smelters have already shut over the past year and tougher credit conditions could hasten mergers or closures in the world’s top exporter of refined tin.

“It’s not easy to get more money like it used to be,” said Agung Nugroho, corporate secretary at PT Timah, Indonesia’s biggest tin miner.

“Now in order to get credit from the banks, besides a good name and letter of guarantee, we have to show them all of the assets,” he said, adding tight credit could force consolidation or mergers between smaller smelters.

A trader at a global trading house confirmed it had cut advances to firms in Singapore and Indonesia to finance tin purchases due to concerns over deliveries not being made.

“We only try to get material from companies that can ship without needing money in advance,” said the trader, who declined to be identified due to the sensitivity of the issue.

A banker at an Asian-based Western lender also said the firm was more cautious about lending due to low tin prices and concerns about deliveries to its customers after Singapore-based Uni Bros Metal Pte Ltd (UBM) had failed to deliver some cargoes.

Asked about the issue, UBM did not directly refer to the missed shipments but said in an email that there had been an “unprecedented” fall in tin prices.

Traders noted that steep falls in tin prices can lead to a cash crunch for trading firms that haven’t sufficiently hedged against price swings.

UBM, a mid-size trader in the tin industry, acted as a middle man, sourcing tin from Indonesian smelters for end-users or major trading houses.

UBM failed to deliver contracted tin shipments to at least two customers in the first quarter of 2015, according to a Taiwanese smelter and a metals trader with direct knowledge of the matter. Reuters could not confirm the reasons for the non-deliveries.

UBM’s failure to make the deliveries has led at least three mid-size trade houses - significant players in the small tin market - to stop advancing funds by prepaying for tin shipments from Indonesia, three sources familiar with the matter said.

Prepayments are relied on by many smaller Indonesian smelters for operating capital. Smaller smelters account for more than a quarter of Indonesia’s tin exports, traders estimate.

UBM had not delivered monthly 100-tonne shipments since March to Taiwan tin smelter Rui Da Hung Technology Materials Co Ltd, according to executive Martin Guo, who said the firm was looking for a new supplier.

Zug-based commodity trader TMT Metals AG did not receive a shipment of 100 tonnes due earlier this year, a source with knowledge of the matter said. TMT won a freeze on UBM’s Singapore assets in the Singapore courts in March, which was later set aside on appeal.

In a separate matter, the Singapore High Court has since appointed a liquidator to UBM over a $2.5 million debt relating to the 2013 termination of a joint venture company, according to court documents.

Indonesia’s tin industry has been struggling for several years with sluggish demand growth from solder in electronics and increasing competition from Myanmar, which doubled ore exports to China last year.

The number of active smelters has fallen from 37 in 2014 to 22 at present, while many were working at less than full capacity, said Jabin Sufianto President at the Indonesian Association of Tin Exporters.

London Metal Exchange (LME) tin shed a third of its value to hit $13,600 a tonne in mid-April from above $20,500 in December, Prices have since steadied around $15,500 a tonne.

Indonesia exported about 75,000 tonnes of refined tin in 2014, equivalent to about a fifth of global production. (Additional reporting by JR Wu in Taiwan, Krishna Das in New Delhi and Lee Rou Urn and Mohaini Ibrahim in Singapore; Editing by Richard Pullin)

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