Tin May Extend Record Rally to $28,000 Per Ton, Largest Exporter Predicts

Tin may rally to a record $28,000 a metric ton because the rainfall that disrupted output this year in Indonesia, the world’s largest exporter, will extend into 2011, according to a government official.

The advance will boost earnings for producers and increase royalty payments to the government, said Witoro Soelarno, secretary to the director-general of minerals, coal and geothermal at the energy ministry. PT Timah, based in Pangkalpinang, is Indonesia’s biggest producer. The metal traded at a record $26,790 on the London Metal Exchange today.

Tin is the best performer this year among the six main metals traded on the LME, climbing 56 percent on concern that supply disruptions in Indonesia and China will cut stockpiles. Venture Minerals Ltd., building a mine in Tasmania, has said that global shortages may last five years. Barclays Capital is predicting a 15,000-ton supply shortage next year, the biggest since at least 2003.

“Tin prices will continue to climb as the bad weather, that disrupted production, will persist until next year,” Soelarno told reporters in Jakarta today. Soelarno said on Aug. 11 that Indonesia’s output of the metal may drop about 20 percent this year to 85,000 tons because of heavy rains.

Tin, used as a solder and in packaging, has rallied from a low of $9,700 in December 2008. The metal for delivery in three months rose as much as 3.3 percent on the LME today.

La Nina

A La Nina weather event has brought heavier-than-usual rainfall to parts of Australia and Asia this year, including Indonesia, Southeast Asia’s largest economy. The rains have also been blamed by industry groups in the country for lower output or missed forecasts for cocoa, palm oil and coal.

“The situation on some metal markets such as tin is tightening considerably,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said in a report. “Besides enormous production problems in Indonesia and also in China lately, we are also seeing stronger stock reductions.”

Tin stockpiles tracked by the LME dropped 53 percent this year, falling to a 17-month low of 12,495 tons on Oct. 1. Exports from Indonesia declined for the first eight months of this year to 60,107 tons from 67,798 tons a year earlier, the Trade Ministry said Sept. 22.

Tin output from China may be restricted until the end of the year because of limitations on power use, industry group ITRI Ltd. said Sept. 29. A general ban on mining was also imposed last month in three eastern provinces in the Democratic Republic of Congo, Africa’s largest producer.

Timah Surges

Tin production will expand 1.5 percent to 334,000 tons next year, while demand will jump 2 percent to 350,000 tons, Barclays said in a Sept. 16 report.

“The catch-up that’s required on the exploration side is quite vast,” Venture Minerals Managing Director Hamish Halliday said yesterday in an interview.

Shares in PT Timah surged as much as 5.7 percent to 3,275 rupiah today before ending at 3,200 rupiah. The stock has jumped 60 percent this year, beating the 42 percent gain in the benchmark Jakarta Composite Index. Source: Bloomberg