Tin Output by World's Largest Shipper to Miss Target, Spot Sales Halted

Tin production by PT Timah Tbk (TINS), the world’s largest exporter, may miss a target this year because of heavy rains and the Indonesian company is trying to renegotiate supplies with long-term customers, according to an executive. 

State-owned Timah may produce 40,000 metric tons this year compared with the 45,000-ton target, Corporate Secretary Abrun Abubakar said in an interview today. Spot sales, which normally account for 20 percent to 30 percent of volumes, have been halted, he said in Jakarta, forecasting further gains in prices. 

Timah’s production shortfall underscores a supply squeeze in the global market that’s made tin this year’s best performer on the London Metal Exchange, with the price reaching a record earlier this month. Barclays Capital has predicted a 15,000-ton shortage next year, the biggest since at least 2003. Timah accounted for 43 percent of the Asian nation’s output in 2009. 

“We are in talks with buyers” Abubakar said. “We’re asking them to renegotiate shipments.” 

Tin, used as a solder and in packaging, has rallied from a low of $9,700 in December 2008, when the global financial crisis slashed demand. The metal for delivery in three months touched an all-time high of $26,790 a ton on Oct. 6, and traded at $25,700 at 3:03 p.m. in Singapore today, down 1.9 percent. 

‘No More Spot Sales’

About 70 percent to 80 percent of sales are usually made on a contractual basis, with the rest made in the spot, or cash, market, Abubakar said. “Now we’re only focusing on meeting long-term contracts to our loyal buyers, no more spot sales.” 

Timah, based in Pangkal Pinang, Bangka-Belitung province, sells most of its production to Japan, South Korea and Singapore, Abubakar said, declining to identify individual customers. 

PT Timah fell as much as 4.5 percent to 3,200 rupiah today, the worst performer on the LQ-45 Index, which tracks the market’s 45 most-traded stocks. 

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 hurt tin production, and also been blamed by industry groups in the country for lower output or missed forecasts for cocoa and coal. 

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. 

Tin stockpiles tracked by the LME dropped 54 percent this year, falling to a 17-month low of 12,255 tons yesterday. Exports from Indonesia declined for the first eight months of this year to 60,107 tons from 67,798 tons a year earlier. 

“If we see the production problems in Indonesia, and also the declines in tin stockpiles on the LME, tin prices most likely will keep rallying,” PT Timah’s Abubakar said. 

Timah produced 45,086 tons of tin last year, according to the company’s website. Indonesia’s total output that year was 105,000 tons, according to an estimate from the energy ministry.Source: Bloomberg