Commodity markets volatility from coal to nickel and tin, which climbed to the highest level in more than six months after the Indonesian government restricted exports, is the direct result of Indonesia’s attempts to ease a record current account deficit by boosting revenue from its mining industry.
Tin price on the Kuala Lumpur Tin Market (KLTM) closed slightly higher with a US$50 increase to US$22,950 a tonne today on renewed buying support. The price increase was in tandem with the rise on the London Metal Exchange (LME), where tin price rose by US$170 to settle at US$22,995 a tonne.
At the same time, Indonesia tin miner Timah recorded a decline in both its revenue and net profits on the back of lower tin production and sale volumes. Timah’s production dipped, leading to lower sales despite a higher average selling price, which stood at $22,455 per metric ton for the nine-month period, higher than the $21,523 per metric ton recorded last year.
The company said in a statement released on Thursday that on Aug. 30 it started to implement a new government regulation requiring all commodity tradings, including metals like tin, to go through the Indonesia Commodity and Derivatives Exchange (ICDX).
The new regulation has forced Timah to make some adjustments to its contracts in order to comply with the regulation, which, in turn, delayed sales. “During the contract adjustment process, the decrease in sales volume in July, August and especially September occurred because of the small number of exchange members at the time,” the company said in the statement.
According to the ICDX website, 50 commodities companies and 31 brokerage firms are listed as members at the exchange. Exports of refined metal and products increased to 2,750 metric tons in October from 786 tons in September, the median of estimates from four analysts and four producers compiled by Bloomberg showed. The forecast compares with exports of 11,048 tons in October 2012. Shipments in September were the lowest monthly total since 2007, when the government began tracking sales of the metal used as solder and packaging.
Stockpiles tracked by the LME dropped to 12,120 tons yesterday, 21.5 percent below a 22-month high Aug. 30, when the rule took effect. Indonesia, which used to account for about 40 percent of global trade, exported 98,817 tons last year.
Global demand will rise 2.3 percent to 350,000 tons next year, exceeding supply by 2,000 tons after an estimated 4,000-ton shortage in 2013, according to BNP. Unless Indonesian exports rebound there will probably be a period of severe market tightness.