State tin company PT Timah has joined some private Indonesian smelters in halting shipments this month as a regulation requiring ingot to be traded locally before export hampered transactions with customers. Timah has declared force majeure to 19 buyers with long-term contracts since August 30, when the trading rule came into force, Timah President Director Sukrisno told Bloomberg.
Five tin producers, including Timah, now trade physical contracts at the Indonesia Commodity and Derivatives Exchange (ICDX). “We have asked our buyers to be members of ICDX and in principal, they have agreed to,” Sukrisno said. Timah brought forward some shipments scheduled for this month to August before the trading rule started, he said.
In a separate interview today, Sukrisno urged the Indonesian government to take a firm line on implementing the regulation. “Some are worried that the trade won’t work,” he said. “The government, the Trade Ministry must send a strong statement that Indonesia is consistent in imposing this policy.”
Megain Widjaja, president director of ICDX, said that the five producer members of the exchange produce 3,000 – 4,000 tonnes per month and that it would never reject applications from other smelters. Meanwhile buyers currently registered with ICDX are 3H Co. Ltd., Daewoo International Corporation, Gold Matrix Resources, Great Force Trading, Noble Resources International, Purple Products Pvt. Ltd and Toyota Tsusho Corporation while a number of other major traders were in discussions about joining. ICDX now has six tin contracts for different grades of metal and turnover this week has risen to over 200 tonnes, more than in the whole of 2012.
ITRI view: It looks like there will be a significant dip in Indonesian shipment levels in August/September, after a very strong performance in the first seven months of the year – tonnages checked prior to export rose by 10.5% to 61,477 tonnes in January-July. It is still very unclear how this situation will be resolved without a significant supply disruption, but one possible solution might be to extend the start date for local trading. Volumes are starting to pick up on the ICDX but major international consumers and traders are unlikely to commit quickly to working through this exchange. There are also plans to launch another tin contract on the Jakarta Futures Exchange which is backed by a group of smaller private smelters, but it appears unlikely that this will succeed.
