Illegal miners feared to drive down tin price
Tuesday, November 12 2002 - 01:20 AM WIB
While PT Timah Tbk the world's largest integrated miner, has cut output to try to lift prices, hundreds of miners in Bangka island remain in full production, hoping Timah and another producer, PT Koba Tin, will continue buying their ore.
In June, Indonesia banned export of tin ore and concentrates by companies other than PT Timah and PT Koba Tin, to quell illegal mining and help boost depressed prices.
State-run Timah agreed to buy tin ore from locals after it stopped operating several dredgers and suspended activities in 100 sites to cut costs, but traders were unsure how long the company would be able to continue the practice.
Some regional traders say at least 10,000 tonnes of unsold ore have piled up in Bangka, off Sumatra, raising fears of an increase in the smuggling that is blamed for oversupplying the global market and depressing prices.
"I don't think we can ask them to stop mining. We are talking about basic livelihood. We are still consistent with our policy to only buy ore coming from our mining sites," said one Timah source. Timah is almost two-thirds owned by the Indonesian government.
"But they may speed up production ahead of the Eid al-Fitr. They may not even observe the fasting month in order to produce more ore. Mining has become their prime source of income," said the source.
Despite the ban, many locals continue mining due to difficulties finding other jobs in crisis-hit Indonesia, the world's most populous Muslim nation. Eid al-Fitr, at the end of Ramadan fasting month, takes place in early December.
Traders said Timah's decision to suspend activities at several sites was also due to the fact that local miners had been operating on its land without permits.
The Timah source estimated the company's refined tin output to match this year's forecast 34,400 tonnes in 2003, versus last year's 38,081 tonnes. Annual worldwide tin production is around 200,000 to 250,000 tonnes.
"There are plenty of stocks waiting for sale in Bangka, and I think fund managers are closely watching this. We don't know how long Timah will be able to keep buying the ore," said a regional trader.
"Timah has to be wise in managing the stocks. If it decides to keep the stocks on the LME warehouses, then prices will fall again," he added.
Traders attributed recent gains in London Metal Exchange (LME) tin prices to falls in output from main producers China and Indonesia. LME stocks were last quoted at 27,390 tonnes, down from all-time high at 39,015 tonnes in late July.
LME tin closed at $4,235 a tonne on Friday, up from $4,210 previously. Tin reached a historic low of $3,635 a tonne in February.
Traders said a stock overhang in Indonesia could encourage smuggling. Tin ore illegally mined in Bangka and Belitung had been smuggled to nearby Singapore last year before reaching smelters in Thailand and Malaysia, they said.
"We strongly believe that smuggling is happening again, but we don't have official data," said the Timah source.
On the Kuala Lumpur Tin Market (KLTM), spot tin was unchanged at $4,195 a tonne on Monday. (*)