UPDATE 1-Indonesian tin output seen down; Bangka rains easing -sources

* Bangka region sees less rain; tin prices at record high
* Indonesia needs investment in expensive dredgers
* Indonesian tin output seen 10 pct lower in 2011 (Adds quotes, details)

Heavy rains are easing in Indonesia's main producing area of Bangka island, although exports in January are still expected to be as much as 35 percent lower than last month, industry sources said on Wednesday.

Analysts see little respite, with a lack of investment in Indonesia's tin industry expected to push already soaring prices to fresh records in 2011, as demand rises for the metal, used in electronics, plating and lead-free solders.

Benchmark tin on the London Metal Exchange hit a record high at $28,698 a tonne on Wednesday, as persistent worries about supplies from Indonesia boosted prices.

Heavy rains and floods caused by the La Nina weather phenomenon have hit tin miners in Indonesia in recent months, squeezing supply from the world's top exporter of the metal.
Indonesia's tin exports in January are seen at a maximum of 5,000 tonnes compared with 7,722 tonnes in December, the Indonesian Tin Industry Association said.

"Exports would be around 5,000 tonnes maximum in January," said Rudi Irawan, vice chairman at the association and director at independent smelter CV Stania Prima. "Rains have eased but we still have high waves because of the monsoon."

He added, "We have depleting onshore reserves and high waves offshore. There are only several smelters now fully-operational, mostly because either they have strong financing or have its own mines."




DRY SEASON TO START
Indonesia's weather agency forecast this month that the dry season is likely to start in most areas only in July.

The heavy rains now appear to be easing.

"We have changed our mining plan so weather is not an issue any more," said Darmansyah, a spokesman at PT Koba Tin in Bangka island. "Tin shipments have been smooth."
Bangka island, off Sumatra's east coast, is the world's largest tin-producing area.

He added that Koba Tin's production would be higher this year than the figure of around 5,000 tonnes last year, but gave no details.
"There is clearly an issue with supply going forward," said a Singapore-based analyst. "It is a bit tighter now because of the weather -- it has been raining since November.
"Normally when this clears up, which should be next month, you will see more material coming out of Indonesia."


INVESTMENT NEEDED
Production in Indonesia has also been hit by a police crackdown on illegal mining, stricter environmental and export rules, and the depletion of easily mined onshore reserves.


Indonesia, the world's second-largest producer after China, has also struggled to lure foreign investment into mining, compounded by some politicians taking a nationalist line on resource exploitation and also because of uncertainty over regulations tied to a new mining law passed in 2008.

"Large investments are needed for Indonesia to sustain the production that they've had over the last couple of years," the analyst said. "A lot more has to come from off-shore -- this is more expensive. You are looking at dredgers that go a lot deeper.

"If you look at the amount of investment needed, and the intrinsic value of the metal, then it will be a bit too risky for the Rio Tintos of this world."
Indonesia supplies nearly 30 percent of the world's tin consumption, and most of it comes from Bangka.

Tin production in Southeast Asia's largest economy is estimated to be around 105,000 tonnes in 2010.
From Indonesia the metal is shipped to Malaysia via Singapore, where it is given London Metal Exchange branding, and then sold on the Kuala Lumpur Tin Market or directly to consumers in Europe. It is also exported to Thailand.

"You are going to see production fall to the tune of 10 percent, even though higher prices will incentivize people to be a bit more risky with mining," said the analyst, adding that he sees tin prices peaking at $35,000 a tonne in 2011.

Soaring demand will help send tin almost 38 percent higher this year, a Reuters poll showed this week.
The survey of 51 analysts showed the cash tin price would average $27,000 a tonne this year, and rise to $27,419 next year.

LME tin is expected to rise to $34,455 per tonne over the next four weeks, going by its wave pattern and a Fibonacci projection analysis, Reuters technical analyst Wang Tao said.
An annual survey by tin consultants ITRI this week said 2009 world usage of refined tin was estimated just over 320,000 tonnes, with 2010 global tin consumption rising by 12.5 percent to an estimated 360,300 tonnes. Source: Reuters