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Indonesia continues to take steps toward regulating tin prices. However, the country’s efforts have been jeopardized by countries like Australia and Myanmar, which have increased production.
Still, experts remain optimistic that tin will make a comeback in 2015, and top-producing countries have considered halting sales to help regulate prices.
Attempt to set market standard backfires
In an attempt to set a benchmark, the Indonesian government implemented a policy in September 2013 that required tin to meet minimum purity standards and be traded on the Indonesia Commodity and Derivatives Exchange (ICDX) before it could be exported. That reduced Indonesia’s tin exports by 17 percent, to just under 76,000 tonnes in 2014 from 91,600 tonnes in 2013.
However, the restrictions on lower-grade tin exports actually had a detrimental effect, as they halted shipments going to China. While China is actually the larger tin producer, it is also the biggest user, and historically China has had to import material to fill its domestic supply gap, with most of its imports being lower-grade material from Indonesia. The ban led China to seek other options and set up a supply chain in Myanmar; in 2014, imports from Myanmar almost doubled from the previous year, hitting 173,000 tonnes.
Further attempts to regulate prices
Indonesia is once again attempting to boost global tin prices,with the Indonesian Association of Tin Exporters discussing the possibility of an export moratorium. No decision has yet been made.
Meanwhile, the county’s biggest tin producer, PT Timah, is making a bold move of its own and will be suspending new sales of tin used in soldering and packaging until prices rise above $20,000 per tonne. The company has stopped offering refined tin ingots on the ICDX and halted sales of other products after prices dropped below $19,000 per tonne.
A PT Timah executive told Bloomberg that a proposal for an export stoppage from the governor of Bangka Belitung, Indonesia’s largest tin-producing region, is an “inappropriate move.” He said the plan may fail to reverse the slump because it was a weak global economy and general decline in commodity prices that drove prices lower. He also said that PT Timah continues to produce tin and prefers to curb exports instead of stopping completely as that may negatively effect the local economy.
Deficit in the cards?
Whether or not Indonesia’s efforts will be successful remains to be seen, but another Bloomberg article notes that ITRI sees global tin production falling short of demand by about 5,000 to 10,000 tonnes in 2015. It sees that scenario being driven by lower exports from Indonesia, with shipments expected to fall to between 65,000 and 70,000 tonnes in 2015 compared to 75,925 last year.
However, recognizing this opportunity, other tin producers like Myanmar and Australia are stepping up to close that production gap. Indeed, Australian mining companies are already looking at developing more projects. Future price projects are thus somewhat up in the air. All in all though, many seem to believe that after a troublesome couple of years, things are starting to look up for tin.
Securities Disclosure: I, Kristen Moran, hold no direct investment in any of the companies mentioned in this article.