by: Robin Bromby From:The Australian January 24, 201312:00AM
FROM July 1, the bar for tin exporters will be set very much higher. Not only will the minimum tin grade in finished metal be increased, but tough new limits on lead, cadmium and iron impurities will provide a real headache for the small Indonesian smelters.
One buyer of Indonesian tin described the requirements as "miracle specifications", with only a few of the larger smelters capable of getting lead content in tin down to 100 parts per million.
How this will affect Indonesia's overall exports is hard to quantify, but you would have to put your money on a dive in the amount of tin entering the world market.
It's all about the government trying to force small producers on the Bangka-Belitung Islands (off Sumatra) to sell concentrates to state-controlled Timah and not process the metal themselves and export illegally.
Only the smelters owned by Timah and the shuttered one at Malaysian Smelting's Koba are capable of meeting the new export requirements.
The islands are the country's main source of tin production.
This new export law is just the latest episode in Jakarta's struggle to end illegal tin exports.
Even before this development, the metal was heading for an acute squeeze. Stephen Briggs at BNP Paribas in his new note, Tin Will Stay on Top, notes tin performed very well in 2012 - it has rallied 45 per cent since July - despite the fact that demand has been relatively weak.
You don't have to look far to see why. As Briggs points out, world mine output peaked as long ago as 2005. More than seven years on, global production is 9 per cent lower than it was back then.
Australian and Brazilian mines have added 4000 tonnes a year, but this was more than outweighed by a 10 per cent fall in Indonesian production and a steep drop in Chinese output.
Briggs says his earlier call of $US27,000 a tonne by next year may soon look conservative, especially when demand picks up.
MLX Price at posting:
15.5¢ Sentiment: Hold Disclosure: Held
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