Indonesia Will Cap Output of Tin, Four Other Metals (Update3) By...

Indonesia Will Cap Output of Tin, Four Other Metals (Update3)

By Naila Firdausi and Yoga Rusmana

Aug. 21 (Bloomberg) -- Indonesia, the world's largest tin exporter, plans to cap production of five minerals including tin to extend mine life and try to control prices, an official said.

The government will cap output of tin at 90,000 metric tons a year from this year, Bambang Setiawan, director general of coal and mineral resources, said in an interview in Pangkalpinang, Indonesia. The government also plans to cap the output of copper, gold, nickel and iron ore, he said, without giving details.

The ceiling by Indonesia may help to sustain a rally in the price of tin, the best-performing contract on the London Metal Exchange this year. The Southeast Asian country accounted for about a third of global tin-in-concentrate production last year, according to figures from researcher ITRI Ltd.

``The main reason is to prevent over-extraction and to keep prices in the global market'' from declining, Setiawan said today from the sidelines of a tin-mining conference. ``If there's too much supply prices will fall.''

Three-month tin futures on the London Metal Exchange touched a record $25,500 a ton in May amid declining stockpiles and lower overseas shipments from China, the world's biggest producer. The contract gained 1.5 percent today to $20,800 a ton, extending yesterday's 3.8 percent advance.

Shares in PT Timah, Indonesia's largest tin producer, gained as much as 12 percent to 2,550 rupiah, and traded at 2,525 rupiah at 3:30 p.m. in Jakarta. The gain put the stock on course for the highest close since Aug. 11.

Freeport-McMoRan

Indonesia, Southeast Asia's biggest economy, is rich in minerals and home to Grasberg in Papua province, the world's biggest gold mine and second-largest copper mine. That site in the east of the country is operated by Phoenix-based Freeport-McMoRan Copper & Gold Inc.

Mangantar Marpaung, a director at the energy and mining ministry, said in June this year that Indonesia may cap tin output at 90,000 to 100,000 metric tons a year from 2009 to extend mine life. A proposal for export quotas was raised in March 2007, when Marpaung said managing overseas shipments would keep the global market from being oversupplied.

Indonesia produced 103,100 tons of tin-in-concentrate in 2007, second only to China's 118,300 tons, according to ITRI. Global production was 317,700 tons last year. Indonesia's output of the metal, used to make beverage cans and for soldering, may be 79,000 tons this year, according to ITRI.

The country has boosted control of the nation's tin industry since February 2007, when the government required all exporters to acquire a permit to ship the metal overseas. To date, at least 19 permits have been issued, including to Timah and PT Koba Tin.

``For Timah, the concern is the amount of reserves they have,'' said Stefanus Darmagiri, an analyst at UOB Kay Hian Securities in Jakarta. ``Their financial strength will depend on higher tin prices and efforts to diversify their business.''

China's refined-tin exports have dwindled this year as a 10 percent export duty and the appreciating yuan make overseas sales uneconomical. Exports of the refined metal plunged 98 percent to 386 tons in the first half, according to customs data.

To contact the reporters on this story: Naila Firdausi at [email protected]; Yoga Rusmana at [email protected]

Last Updated: August 21, 2008 04:32 EDT