Govt Tin Crackdown to Keep Prices High

JAKARTA ~ Tin will fetch record prices over 2007 because of a regulatory clampdown on illegal tin miners and smelters in Indonesia, the world’s second-biggest supplier of the metal, analysts say.

The government began closing down unregistered tin operators last year and implemented stricter export regulations in February that require firms to register for clearance.

The moves cut supply into the global market and contributed to a rise of about 15 percent in the tin price so far this year, with demand continuing to be driven by China and India, the booming economies of Asia.

Isnaputra, a mining analyst with securities house Danareksa, said the tin price would average US$14,000 per ton this year.

The commodity, used extensively in the electronics and other industries, has been trading at around that level recently – the highest for about two decades.

“Indonesia previously supplied 120,000 tons per year, which represented 17 percent of global tin supply. Half of its supply was from unregistered companies,” Isnaputra said.

Experts estimate Indonesia’s supply could fall by about 30,000 tons in 2007 as firms comply with the new rules.

“Since 2000, China has taken the lead as the world’s bigger tin consumer. Previously it was Europe and the United States,” Ahmad Solihin, an analyst at Mandiri Sekuritas, said.

Solihin said the tin price, which he believes may average $12,500 over the year, still well up on 2006, would depend on how serious the government was about cracking down on the illegal miners.

“If all illegal smelters are banned, automatically the tin price (will rise) … so far, the government has been serious and so far it’s been successful.”

State-linked PT Tambang Timah, the world’s largest integrated tin producer, is one of the few firms to have obtained clearance under the new regulations.

Its share price has rocketed from about Rp2,500 (27 cents) in late 2006 to Rp11,400 as investors bet on bumper profits. The firm has an export capacity of around 50,000 tons per year.

“We are doing well. We are continuing to export. We’ve shipped about 5,000 tons since February,” said Prasetyo Saksono, the firm’s corporate secretary.

Koba Tin, the country’s second-largest tin producer, has suspended deliveries amid an ongoing probe in the Bangka-Belitung islands, which account for nearly half of Indonesia’s refined tin exports.

Three of the firm’s top executives have been arrested on allegations that it was involved in buying ore from illegal miners.

Refined tin for export must meet a purity level of at least 99.85 percent under Indonesia’s new rules. Firms must also submit three-monthly reports on their exports and allow government-appointed surveyors to check the shipments.

Energy and Mineral Resources Ministry official Djoko Purnomo said dozens of small smelters had been shut since October as a result of the crackdown on illegal operators.

“About 37 small smelters were forced to close because they did not have licenses from the central government. They only possessed an authorization from the local administration,” Purnomo said.

Officials say the regulations are intended to curb unchecked shipments of tin and mounting illegal mining, which some feared was causing environmental damage.

“It will prevent environmental destruction in Bangka-Belitung from getting worse,” Indonesian Mining Association spokesman Priyo Pribadi said.

He added that the regulations would also protect state-linked PT Tambang Timah, since it is one of the few firms exporting under the new regime.

Some analysts say the high tin price will eventually encourage more supply from elsewhere in the world and lead buyers to consider alternative metals, causing the tin price to fall back.

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