Indonesian tin company limits supply

The world’s biggest exporter of tin, Indonesia, has said it plans to limit output in order to keep the price of the commodity high and benefit the local market.

The news led to a rise in fuel prices of over six percent on the market in London, as Indonesia is the second largest producer of tin, trailing only to China. One third of the total world output of tin comes from the shores of Indonesia

Production will be limited to 90,000 tonnes for the year 2008, with a proposed increase to 100,000 tonnes for next year, and the limit will be introduced beginning next month.

Government decree to come into play

A ministerial decree will come into force to restrict the output, with a set level of monthly production levied on manufacturers for the foreseeable future.

As production of tin in Indonesia is estimated to reach only 80,000 tonnes by the end of this year, the limits will not likely have an effect before 2009. Analysts are concerned for the world supply of tin once the limits do begin to have an effect.

The record year for Indonesian tin production was in 2005, when a total of 140,000 tonnes were manufactured, but since then the numbers have suffered a steady decline, with only 103,000 tonnes of output last year. A number of small producers entered the market in 2005, thus exaggerating production levels.

Rising oil price hampers profits

With costs of tin production rising in line, and in excess of, the price of oil the profit margins ion the business have fallen, and a government hard line on illegal; mining has led to the loss of a number of smaller manufacturers previously stoking up the market. Government subsidies on fuels have also been reduced, pushing the costs higher still.

The state owned PT Timah, one of the major players ion the tin market, has also suffered major decline with output scheduled to fall by 16 percent this year, to a total output of less than 50,000 tonnes.

China’s major manufacturers have also forecast a slow don in production this year, and the forecast deficit in global supplies of tin has been revised from 12,000 up to 20,000 tonnes.

Although prices have been falling since May, limited supply has helped keep tin price buoyant in comparison with other commodities.

Geologists estimate that Indonesia is sitting on around 800,000 tonnes of tin reserves, a figure believed correct at January this year.