(Updates price in fifth paragraph.)
July 4 (Bloomberg) -- Tin exports from Indonesia will probably drop to the lowest level in eight years as the government prepares to introduce a rule to prevent inaccurate declaration of cargoes from the world’s top supplier.
Sales may decline 13 percent to 80,000 metric tons in 2014 from 91,612 tons last year, according to the median of estimates from nine smelters, traders, analysts and exchange officials compiled by Bloomberg. That would be the lowest since the Trade Ministry started tracking sales in 2007.
The metal climbed 15 percent in the past year amid a global shortage after Indonesia increased the minimum tin content for exports and ordered that ingots be traded through a local exchange before shipment. The nation is seeking to create a market to challenge the London Metal Exchange as a global pricing benchmark. Shipments rose in May after some cargoes of ingots were declared as lower-grade products to obtain exemption from the trading rule, the Trade Ministry said.
“There will be no more loopholes,” said Fenny Widjaja, commissioner of the Indonesia Commodity and Derivatives Exchange, also known as the ICDX, the only bourse that’s permitted to trade refined metal before export. The new regulation “will help distinguish refined ingots from other products,” he said in an interview in Jakarta on June 30.
Tin for delivery in three months fell 0.2 percent to $22,850 a ton on the LME at 7:25 p.m. in Singapore, after reaching $23,070 on July 2, the highest level since June 10.
While exports more than doubled to 12,779 tons in May from 5,219 tons in April, they dropped 22 percent to 34,456 tons in the first five months from a year earlier, according to Trade Ministry data. Solder and other products represented 21 percent of total exports through May, the data show. The ministry is scheduled to release data for June next week.
The new rule will set standards for quality, packaging, shape and size of shipments, Widjaja said. The regulation will also require companies to have separate units to produce 99.9 percent tin ingots and to make solder, 99.99 percent pure tin and other products, Bachrul Chairi, director general of foreign trade at the Trade Ministry, said in an interview on June 27. The order will be issued as soon as possible, Chairi said.
While smelters already need permits from the Energy and Mineral Resources Ministry to produce refined ingots, the rule will oblige them to have licenses from the Industry Ministry for other products, Widjaja said.
The rule will set specifications based on international standards for non-ingot products, Indonesia’s Deputy Trade Minister Bayu Krisnamurthi told reporters in Jakarta on June 24, without giving details. There are indications that refined ingots have been declared as other products to skip the requirement that they have to be traded on the ICDX, he said.
Global demand will outstrip supplies for a fifth year in 2014, pushing the LME price to $25,000 as soon as the third quarter and to $27,000 by mid-2015, according to BNP Paribas SA. The bank estimates that the market will have a global deficit of 13,000 tons this year and 10,000 tons in 2015.