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Bloomberg: Indonesian Tin Smelters Stop Exports on Exchange Trading Delay

September 3, 2013
Bloomberg News

By Yoga Rusmana

Thirty Indonesian tin smelters have stopped ingot shipments this month
because of a delay in regulatory approval to start physical trading on
a local exchange in the world’s largest exporter of the metal.

The smelters with a total production capacity of about 10,000 tonnes
per month have committed to trade Serumpun Tin contracts at the
Jakarta Futures Exchange and have yet to receive trading permits,
Hidayat Arsani, president of the Indonesian Tin Mining Association,
said today. The independent smelters accounted for about 70 percent of
the country’s shipments last year, according to trade ministry data.

The stoppage follows Indonesian rules requiring ingots for export to
be traded locally from Aug. 30 and higher purity standards. Five
producers out of a total of 47 in the country, including the biggest
PT Timah (TINS), have started trading physical tin contracts on the
rival Indonesia Commodity and Derivatives Exchange.

“This is really bad, when some smelters have invested money to meet
the purity standard, now they still cannot export,” Arsani said by
phone from Bangka island, the country’s main producing area. The
smelters will wait up to 45 days for the permits and if they are
rejected will take the case to court, Arsani said.

Tin for delivery in three months fell 0.4 percent to $21,150 a ton on
the London Metal Exchange by 6:02 p.m. Jakarta time. The metal, used
in soldering and packaging, has risen 5.9 percent since July 1, when
the higher Indonesian purity standards came into effect and led to a
slump in exports. Two Markets

The Jakarta Futures Exchange submitted a permit application to the
Commodity Futures Trading Regulatory Agency on Aug. 20, Director M.
Bihar Sakti Wibowo told reporters in Jakarta. The smelters will meet
tomorrow in Bangka, the country’s main tin producing area, to
discuss the matter, said Tjahyono Mukmin, the president director of
the Serumpun Tin board. Eighteen smelters have registered as members
to trade tin, out of the 30 had earlier agreed to do so, said Mukmin.

“We are studying their application,” Sutiono Edi, head of the
Commodity Futures Trading Regulatory Agency, told reporters in Jakarta
today. “We need to evaluate the current contracts first before we
can continue with another. We want to have one price reference, we
don’t want to confuse the market by having two markets.”

Indonesian smelters are backing local exchanges to try to establish an
alternative to the benchmark on the London Metal Exchange.

“If we really have to, we can stop exports while waiting for the
permit for as long as 3 months,” Mukmin said.