Indonesia's PT Timah, the world's largest tin exporter, will fail to meet its supply contracts this year, with output hit by unseasonably heavy rains, said a spokesman.
Timah expects to produce at most 40,000 tonnes of refined tin, well below the 42,000 tonnes it is contractually obliged to supply.
It is now negotiating with its contract buyers, said spokesman Abrun Abubakar.
"We haven't declared force majeure yet. But our customers are mostly understanding that there has been difficulty this year due to the weather," he said.
Timah's tin stocks are low and would not help it meet its contracts, he said, declining to supply tonnage figures.
"We will continue to try to produce as much as possible till the end of the year, while the weather permits. But we think that output will be 40,000 tonnes maximum this year," he added.
This means Timah's output will fall at least 11% from last year's output of 45,086 tonnes.
The original 2010 target was 45,000-48,000 tonnes.
Abubakar thinks it is unlikely that Timah will be asked to pay fines or compensate for any losses.
"Our customers are all long-term customers. Their main wish is to secure raw materials for their production, so there should not be any disruption to our long-term relationships with customers," he said.
"This year is an anomaly, weather-wise. April to September is supposed to be the hot and dry season which is very good for mining. But this year, it has been raining continuously throughout the months. Heavy rains season started again from August," he added.
Tight tin supply from Indonesia, the world's largest tin exporter, has helped LME three-month prices to an all-time high of $26,450 per tonne.
Cash prices are closing in, at $26,550 per tonne on Thursday, a sharp rise from September's daily cash average of $22,693.07.
Other tin producers in the country also expect output to be hit by the unexceptionally heavy rains (MB Sep 9).
Bangka Belitung Timah Sejahtera (BBTS), a consortium of seven tin producers, expects production to fall to 900 tpm in September and October, from a more normal level of 1,500-2,000 tpm.
BBTS is capable of producing 2,800-3,500 tpm.
Koba Tin, however, remains confident that it will meet its target of 6,435 tonnes of refined tin this year, up 5% from last year's production, due to its sophisticated mining equipment.
A broker has predicted that tin prices can hit $30,000 per tonne this year, and $35,000-40,000 next year with supply continuing to be tight (MB Oct 6).
Timah produced 19,501 tonnes of tin from January to June, down 24% from the previous half, and just 1% higher year-on-year (MB Aug 31).
Metal Bulletin
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