An export curb by tin smelters in Indonesia, the world’s biggest supplier, will fail to sustain a price rally as mined output continues rising, according to Australia’s largest miner of the metal.
Unregulated mining from small, independent producers in Indonesia and Myanmar will keep pressuring refined metal prices in 2015, Peter Cook, chief executive officer of Metals X., said in an interview in Hong Kong.
Tin was the worst performing industrial metal over the past year on the London Metal Exchange as miners in Myanmar and Australia increased supplies. Twenty-two Indonesian smelters including Timah, the nation’s largest shipper, agreed on Monday to start limiting exports in April to boost prices to $23,000 a metric ton. Prices on the LME rallied 1.4 percent this week to $17,550, set for the biggest weekly gain in two months.
“I’m quite cynical about what the Indonesians say,” Cook said on March 24. “Indonesia has said a number of times that they’re going to stop exports. All that means is the people keep mining, the supply keeps coming, it’s just stockpiled before being sold into the market. Until they cut their mining production, the supply will still be there.”
Indonesia’s overseas sales will be limited to 4,500 tons a month, compared with an average of about 6,327 tons in 2014. Shipments dropped to 5,986.4 tons in February from 6,770.2 tons in January, the Trade Ministry said March 10.
Exports fell 17 percent to 75,925 tons in 2014, the lowest in at least eight years, after Southeast Asia’s largest economy toughened rules in 2013 to boost sales of higher-value products. New quality standards for exports were unveiled Nov. 1.
Myanmar has emerged as a new source for China, the biggest producer and consumer of tin, amid restricted supply from Indonesia. Output in Myanmar will rise 12 percent to 28,000 tons in 2015, accounting for 10 percent of the global market, researcher ITRI said in October last year.
“Tin’s still a commodity where maybe 40 percent of world mining supply is still mined by small miners in very poor countries,” said Cook. “If they find tin, they’re not interested in the market, they’re just interested in feeding their families, so they just continue to mine it until they can’t mine it any more.”
The metal, about 70 percent of which Cook estimates is used in electronics, entered a bear market Dec. 19 on concern demand will slow amid ample supply. China set its economic growth target at about 7 percent for this year, which would be the smallest increase since 1990.
Tin in London is down 9.5 percent since the start of the year, extending its worst annual loss since 2011. The contract for delivery in three months on the LME fell 0.6 percent to settle at $17,550 a ton on Tuesday.
Shares of Metals X, which earned 32 percent of its revenue from tin in fiscal 2014, touched A$1.35 on Feb. 13, the highest in almost four years. They traded at A$1.225 in Sydney at 12:32 p.m. in Hong Kong.