Around the Markets: Tin prices expected to rise Bloomberg News...

Around the Markets: Tin prices expected to rise

Bloomberg News
Tin prices may rise next year amid concern that some smelters in Indonesia, the world's second-largest producer of the metal, may not reopen after being closed by the government, according to Standard Bank.
Tin for cash delivery on the London Metal Exchange may average $10,000 a metric ton next year, 23 percent higher than the bank's last estimate, analysts led by Mike Skinner at the London unit of Standard Bank, the biggest lender in South Africa, said in a monthly report. It has averaged $8,580.10 a ton this year.
Cash prices rose to their highest in at least 17 years in October after the Indonesian government closed 20 smelters to investigate allegations that they used illegally mined ore. Few are likely to restart because of speculation new rules may impose ownership and pollution controls, the analysts said.
"The price still has the potential to go up" because the Indonesian clampdown is limiting global supply growth, Adrian Rusmana, head of research at Kresna Graha Sekurindo, a brokerage and investment house, said by phone Thursday from Jakarta. "It makes sense to me, the 23 percent increase in forecast."
Tin for cash delivery in London rose $110, or 1 percent, to $10,825 on Wednesday. It was bid at $10,750 and offered at $10,760 at 12:04 p.m. Singapore time Thursday. It has risen 67 percent this year. Tin for delivery in three months has surged 65 percent this year, making it the third-best performing metal of the six traded on the London exchange.
Indonesia mined 80,000 tons of tin last year, or about 29 percent of global output, according to the U.S. Geological Survey.
The smelters closed by the Indonesian government "are expected to be shut until at least the end of this year," Standard Bank said in the report e-mailed Tuesday. "Some are likely to remain closed permanently."
Global demand for refined tin will rise 4.1 percent to 396,000 tons next year, exceeding output, the Standard Bank analysts said. Tin is used mostly in soldering electronic components.
"We have lowered our production forecasts for 2007 from 399,000 tons to 386,000 tons to reflect the Indonesian losses we are expecting," the analysts said.
The output decline caused by the closure of the Indonesian smelters is not likely to be compensated by Timah of Indonesia, the world's second-biggest tin refiner after Yunnan Tin of China, the bank said.
Timah is expected to produce 40,000 tons this year and 45,000 tons next year, Thobrani Alwi, president director of the company, said last month. The revised target for this year is still 4.3 percent lower than the output last year of 41,799 tons.
Shares of Timah, which is 65 percent owned by the Indonesian government, surged to a two-year high of 2,600 rupiah, or 28.5 cents, on April 27. The stock may rise to that level again by early next year, along with gains in the tin price, Rusmana said. It rose 100 rupiah, or 4.1 percent, to 2,525 in Jakarta on Thursday.
The metal could average $10,000 a ton until year-end and exceed an average of $10,000 next year on the rising sales to China, Alwi said Nov. 28.
The Standard Bank analysts said that demand would likely exceed output by 5,000 tons next year, after accounting for stockpile sales by the U.S. government. The bank had previously forecast output to exceed demand by 8,000 tons.
Robin Bhar, a metals analyst at UBS in London, estimated that the supply shortfall next year could be 4,000 tons.
Stockpiles in warehouses monitored by the bourse fell 20 percent this year after the closures in Indonesia and after rival workers clashed at the Huanuni mines in Bolivia.
"Clearly, any supply disruption, such as that which we saw this year out of Indonesia or Bolivia, can see the market slipping into a deficit" next year, Bhar said by phone Wednesday.
ITRI, an organization in Britain funded by tin producers, said in October that world usage this year will rise more than 10 percent to a record, led by demand from China, the world's largest consumer of the metal.
Consumption will jump to 367,000 metric tons this year, ITRI said on Oct. 19. The organization based its forecast on data supplied by independent metals consulting company CRU in London.
China is leading demand growth, consuming almost 62,000 tons in the first six months of this year, a 34 percent jump from a year ago, ITRI said.
Consumption rose 12 percent in Europe and 4.2 percent in the Americas.