Leading Indonesian tin industry representatives have confirmed to Bloomberg that the Indonesia Commodity and Derivatives Exchange (ICDX) has maintained a minimum selling price for tin traded since new export regulations came into force on 30 August last year. Under the new rule all tin ingots exported must be sold through the exchange.
The tin committee at the exchange agrees the price each Monday, according to Sukrisno, President Director of PT Timah, the country’s biggest producer and a panel member. Sales cannot be made below the weekly price, which is officially called the Suggested Opening Bid, or SOB, and is also known as the floor price, according to Fenny Widjaja, a commissioner at the ICDX. Last week, the rate was $22,950/tonne, said Rudy Irawan, a committee member.
“We have a moral obligation to keep prices from falling below the cost of production,” Irawan, a former deputy chairman of the Indonesian Tin Association, told Bloomberg. “We seek only a fair price. Miners must invest in exploration, expansion as well as post-mining activities such as reclamation,” he said
The floor price will help protect the ICDX from fluctuation and speculation, according to Sukrisno. The committee decides on the rate after reviewing market fundamentals, including the level of inventories, supply and demand, he said. The tin committee consists of representatives of mining companies, buyers, the government and the clearing house.
ITRI View: The floor price system resulted in the ICDX offer prices being at a large premium to the LME price through parts of January and February, resulting in much lower trading activity. However the recent strong recovery in LME prices to over $23,000/tonne has resulted in a revival in trading volumes on the Indonesian exchange. Total trade in the five tin contracts in February totalled 816 lots or 4,080 tonnes, up by 7.5% from January.
