Tuesday, November 4, 2008

Indonesia May Cut Tin Output If Price Keeps Dropping

[ Bloomberg ]

By Naila Firdausi and Bambang Dwi Djanuarto

Nov. 3 (Bloomberg) -- Indonesia, the world's largest tin exporter, may reduce production if the price extends its decline, an Energy and Mineral Resources Ministry official said.

``Output will be less than 90,000 tons this year,'' Bambang Setiawan, director general of coal and mineral resources, said in an interview today. ``If the price keeps tumbling we'll talk with local governments and producers on their output quotas and we'll have to tighten them.''

Tin, mostly used in soldering and food cans, has slumped 46 percent from a record $25,500 a ton in May on concern the global credit crisis would push the world economy into recession and reduce demand for commodities. The price slump will probably curb investment and delay new projects, Peter Kettle, research manager of ITRI Ltd., a producer-funded group, said Oct. 29.

``It will definitely have some impact if Indonesia cuts output as they and China are the biggest producers,'' said Pang Ying, an analyst at Shenzhen Rongtuo Trading Co. ``The market will be watching Chinese supplies closely. If these drop too, we could see prices bucking the general downtrend.''

PT Timah, Indonesia's largest tin mining company, may produce 45,000 tons of refined tin this year, while PT Koba Tin, a unit of Malaysia Smelting Corp., may make ``less than 10,000 tons,'' Setiawan said in Jakarta.

Timah Corporate Secretary Abrun Abubakar said Oct. 22 that the company may produce 45,000 tons. That was 6.3 percent down from an August forecast by company president Wachid Usman.

Lower Production

Koba Tin said Oct. 21 full-year production was already scheduled to be half the original target of 15,000 tons. In the 10 months through October, output totaled 6,000 tons, according to company president Kamardin Md Top.

Indonesia's small tin smelters have already agreed to halt production to help stem the price decline. All nine members of PT Bangka Belitung Timah Sejahtera, a group set up in 2007, agreed to stop output, Ismiryadi, a member of the board of commissioners, said in an interview Oct. 21. The group produces about 3,000 metric tons a month.

``Today some of the once probable projects are now only possible, while many previously possible projects have already been postponed or canceled,'' ITRI's Kettle said at a conference in Istanbul last week.

The metal is heading for a third consecutive year of supply shortfall, Kettle said. The deficit may reach 20,700 tons, compared with 2,500 tons last year, he said. That would be more than five times larger than existing stockpiles monitored by the London Metal Exchange.

Tin for three months delivery advanced 2.5 percent to $13,732 a ton on the London Metal Exchange today.

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