Weather-related production woes caused the world's largest tin...

Weather-related production woes caused the world's largest tin exporter, Indonesia's PT Timah to stop sales on the spot market.

State-owned Timah is renegotiating tin shipments with contractual buyers as production has been hit by unusually heavy rains that hurt production in Bangka-Belitung Province, which accounts for most of Indonesia's tin production. Timah sells most of its production to Japan, Singapore and South Korea.

In September Indonesia's trade ministry forecast that tin exports would drop from 99,297 metric tons in 2009 to 80,000 metric tons this year. During the first eight months of the year, Indonesia exported 60,107 tonnes of refined tin.

Tin is this year's best performer on the London Metal Exchange as LME tin stockpiles have fallen to a 17-month low of 12,255 tonnes, falling about 50% since January. U.S. tin premiums have risen more than 50% so far this year. Reuters reported that premiums for grade A material containing 99.80% tin, were seen trading in a range of $550 and $600 per ton among the LME three months future price, which hit a record $26,790 per tonne last week.

PT Timah Corporate Secretary Abrun Abubakar told Bloomberg that Timah's spot sales account for 20% to 30% of production volume. Last week Timah had declared it would be unable to meet all of its contractual supply obligations.

Timah mined 43% of Indonesia's total tin production of 105,000 tonnes in 2009. Meanwhile, tin sector trade association ITRI warned late last month that tin exports from China may also be restricted until the end of the year because of limited power supplies.

ON Tuesday ITRI estimated global refined tin demand will increase by 15% to 345,000 tonnes this year. "Price action depends both on how demand leads and supply follows," ITRI noted.

The association observed that Chinese tin prices have remained well below LME levels recently "and the current differential will encourage producers there to start exporting again unless it is closed quickly."

"There are three big problems," ITRI explained. "Latest reports are that PT Timah may miss its annual production target of 50,000 tonnes by 10,000 tonnes ore more, while 18 private smelters (out of 31 with export licenses) are believed to be shut down."

"Secondly there is a huge political problem around ‘conflict minerals' from Central Africa. Most mining activity in the eastern provinces of DR Congo-which accounts for about 5% or world supply-has been halted since mid-September," the association observed. "Third there are hardly any significant new tin mine projects on the horizon until 2012/2013."

"Assuming the world does not experience a double-dip recession and demand continues to grow, the tin supply chain will be stretched even further next year."