The price of tin gained more than 5 per cent following reports that supply declines were expected from Indonesia, the world’s largest tin exporter and second-largest tin producer.

The Indonesian government will be capping tin output at 90,000 metric tones in 2009 in order to “prevent over-extraction and to keep price in the global market from declining”, according to Bambang Setiawan, Director General of Coal and Mineral Resources. He said if there was excess supply, prices would fall. Last year, Indonesia accounted for nearly a third (103,100 tonnes) of global tin in-concentrate production (317,700 tonnes).

The latest move is likely to maintain the current rally in tin price. Last May, three-month tin futures on the LME had reached a record US$25,500 a tonne due to stockpile declines and lower shipments from the world’s biggest producer, China. After this latest news out of Indonesia, three-month tin futures rose to US$21,550 after Wednesday’s high of US$20,500.

Since February 2007, Indonesia has increased control over its tin industry by requiring all exporters to obtain overseas shipping permits. Since then, the government has issued 19 permits to companies including Timah, the world’s largest integrated tin miner, and PT Koba Tin. Timah, which produced 58,086 tommes of tin-in-concentrate last year, is predicting not being able to achieve its production target of 50,000 tonnes this year due to dry weather conditions that have hampered operations. The upcoming Muslim fasting period in September is also expected to affect production in this Muslim dominated nation.

UOB Kay Hian Securities analyst Stefanus Darmagiri has said that for Timah, the concern was the amount of reserves they had. The company’s financial strength, according to him, will depend on higher tin prices and efforts to diversify their business. Today, shares in Timah rose 12 per cent, which places “the stock on course for the highest close since Aug. 11, according to a Bloomberg report.

World supply for 2008 is already down. Indonesia’s output is expected to be only 79,000 tonnes, which was purposefully “aimed at reducing environmental damage in main tin-mining areas,” according to a government official. Refined-tin exports from China have also fallen this year by 98 per cent to 386 tons in the first half as overseas sales become uneconomical due to a 10 per cent export duty and an appreciating yuan. The global tin supply deficit was predicted to reach 20,000 tonnes this year; a figure that was already revised earlier from 12,000 tonnes.

Congo tin export strike update

An agreement between North Kivu tin exporters and the Congolese government over recent export tax increases and halted tin shipments is expected to be finalized this week. In July, the Congo’s customs agency, Ofida, raised the reference price from US$4 to US$14 per kilogram, on which it levies an 11 per cent export tax on tin ore. The move provoked tin exporters in North Kivu, the nation’s main tin ore producer, to halt exports. Around 2,500 tonnes of cassiterite ore are sitting in North Kivu’s capital, Goma, since buyers ceased operations over a week ago.

The Association of Exporters of Minerals in North Kivu’s President John Kanyoni said the government had accepted a proposal this week that called for fixing the export tax at 5 per cent of the LME price. Kanyoni said that in the ministries, “they were okay with it … they were just waiting for the Minister of Finance and the Minister of Mines to sign a decree”. Kanyoni felt exports could resume once the agreement was finalized. Deputy Mines Minister Victor Kasongo said that they still had some areas where an agreement was needed, “but we’re headed in the right direction.”

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