Indonesia says to impose tin export royalty, ban ore shipment

* Every tin exporter expected to pay royalty charge

* Further Indonesian tin cutbacks supportive of long-term prices

* Indonesia seeks to add value to mineral wealth 

Indonesia, the world's top refined tin exporter, will impose a new "royalty" charge on all tin shipments and only allow the export of refined tin, a trade ministry official said on Friday, a move that is expected to lend support to weakening global prices. 

Southeast Asia's largest economy, which supplies about 30 percent of the world's tin consumption, expects to produce 90,000 tonnes of refined tin this year, up from 78,965 tonnes last year, on expectations of improved weather conditions. 

"Every exporter will have to pay royalty before they can ship the metal," Deddy Saleh, director general of foreign trade at the trade ministry told reporters.

"We are preparing a new regulation on tin export as an amendment to the existing trade minister decree. It is almost final actually." 

Under the new rule, the government will not allow export of raw tin -- tin ore and concentrate -- and will only permit refined tin shipments, Saleh added. 

"Only tin which (has) its royalty paid by exporters can be shipped for export," Saleh said. This is seen to be consistent with the government's policy to stop non-value added raw material exports within the next three years. 

Trade ministry officials were unavailable to give further details on how the royalty payment will be calculated and paid.

At 0835 GMT, benchmark tin on the London Metal Exchange (LME) was at $24,050 a tonne, up from $23,605 at the close on Thursday. 

Tin, used in electronics, plating and lead-free solders, struck a record high above $33,000 in April. A crackdown on illegal mining, tighter export regulations, declining onshore 

reserves and rain that had hindered production in Indonesia have helped drive the tin rally earlier this year. 

CRACKDOWN

"We have seen Indonesian policy having a significant impact on tin in recent years, notably with the clampdown on 'illegal' tin mining constraining tin ore/concentrate shipments over the past year and a half, said David Wilson, analyst at Societe Generale in London. 

"Further cutbacks in ore/concentrate exports can only be supportive for prices, as it would impact on refined production levels." 

Earlier this week, the Indonesian Tin Industry Association told Reuters that an environmental crackdown in the main tin producing region of Bangka island, was hindering domestic smelters' supplies. 

Tight supplies and resilient demand will keep tin prices high this year, despite the impact of the earthquake on big consumer Japan, a Reuters survey of metals analysts showed in April. 

"It appears that Indonesia had, at least unofficially, modestly relaxed restrictions on tin mining and exports as tin prices moved to record highs," Wilson added. "Now that prices are at the year's lows, the announcement does appear to be well timed in terms of providing a floor to prices." 

"However, with the faltering demand growth outlook, due to slowing manufacturing growth in China, and significantly lower growth scenario for Europe and the U.S., we would still expect to see a relatively balanced market this year." 

An April poll forecast that the global tin market will remain in deficit this year, and is likely to narrow to 12,750 tonnes, the consensus of eight analysts showed, from a 15,000-tonne deficit predicted in a January poll. 

"The royalty... obviously will put upward pressure on international pricing, as Indonesia is such an important source of supply but how much pressure will depend on how big the royalty is," said analyst Stephen Briggs of BNP Paribas in London.

He added that the ban on exports of tin ore, is in line with their previously announced policy to halt exports of non-value added raw materials by 2014.

The Indonesian energy and minerals ministry has been drafting a regulation, part of a mining and coal law introduced in 2009, that would by 2014 require miners to process coal and minerals into higher value products before exporting them.

Like many other emerging and resource-rich nations, Indonesia is looking to boost revenue from the mining sector.

Tin is not the only LME metal to see problems in the archipelago of 17,000 islands, after the trade ministry said nickel exports fell almost 31 percent in the first half of the year, due to disputes at some shipping ports. Source: Reuters