LONDON Smelters that rely on lower-purity tin could be hurt by Indonesias new regulation requiring material to be 99.9-percent pure in order to be exported.
"The quality issue will affect other smelters outside of Indonesia who had previously relied on crude tin as feed, which theoretically can no longer be shipped," a trader told AMM sister publication Metal Bulletin. "On the (London Metal Exchange), I would say the situation is affecting the market, with tin being the only metal (in recent days) to increase in price as the others fell."
Three-month tin climbed to $22,295 per tonne Sept. 5, the first time the price breached $22,000 in four weeks, following PT Timah Tbks declaration of force majeure, which was linked directly to the new legislation (amm.com, Sept. 4).
Indonesian refined tin exports are now required to contain a minimum of 99.9 percent tin, with specific maximum impurity limits for nine other elements, including aluminum and zinc. The tin market has yet to feel the full impact of the new legislation, but more difficulties are expected in the coming months.
"Tin demand over the summer has been very low and stocks are mitigating the effects of the Indonesian situation in the very short term, but if the situation is not resolved soon I imagine premiums will increase again more significantly," the trader said.
On the other hand, Peter Kettle, manager of statistics and market studies at the International Tin Research Institute (ITRI), said he believes the new regulation may be the right move for Indonesia. "I am getting the impression that the new regulation might just work, and can see volumes starting to pick up on (the Indonesian Commodities and Derivatives Exchange)," he said in an e-mail.
But Kettle said the Indonesian legislation was implemented too hastily, causing immediate difficulties for smelters within the country. "The timing of the implementation is much too tightless than two months from announcement in early Julyand it would make sense for the start date to be pushed back to give the industry time to adapt and avoid supply disruptions," he said.
The most reasonable way of resolving the problems caused by the new legislation would be to extend the time frame for the exchange trading requirement by a few months to give the market time to adjust, he said. "It is impossible to expect the industry to adapt to this major change in just a few weeks from early July to end-August."
The market is still under the impression that things will "go back to normal" in the next couple of months, based on previous experience with legislation on tin and other metals in Indonesia, Kettle said.
"ITRI is now expecting a 2,000-tonne deficit in 2013 (because of) a surplus in the first half of the year, slow demand and assuming Indonesian mine production will be about 95,000 tonnes, compared with exports running at an annual rate of about 105,000 tonnes up to now," Kettle said.
In terms of price outlook, he said, much depends on global macroeconomic factors, as well as the turmoil in Syria, and he is not sure whether there will be a significant rise in the near term.