Timah may stop dredgers if price fail to rise
Monday, September 9 2002 - 07:52 PM WIB
President Director Thobrani Alwi also said Timah was sticking to its target of producing 34,400 tonnes refined tin in 2002, down from 38,081 tonnes last year, but would closely monitor price and tin inventories movements on the London Metal Exchange (LME) in the fourth quarter.
"If prices don't move from the current level, we also plan to stop operating some of the high-cost dredgers in Bangka waters. We will monitor price movements in the next two months," Alwi told Reuters in an interview by email.
Alwi did not elaborate but regional traders said the stoppage could cut Timah output by 5,000-10,000 tonnes this year. Timah, which has more than 20 dredgers, operates in Bangka, off Sumatra.
Three months tin futures climbed to $3,935/3,950 a tonne in LME morning trade on Monday from $3,880 at the close on Friday, boosted by the Timah news. But prices were still below $4,540 recorded in mid-July.
Some traders said prices could improve further, if Timah went ahead with the plan to stop operating high-costs dredgers.
"The (investment) funds may stop selling. If they don't sell, prices may easily touch $4,500 a tonne," said one trader.
Traders said current lower prices were due to a weak global economy, which has slowed consumption and led to rising stocks.
Global tin inventories in LME-registered warehouses reached an all-time-high of 39,475 tonnes in early August, up from the usual 15,000-20,000 tonnes, traders said. Stocks were last quoted at 34,305 tonnes.
Regional traders said Timah was losing money because its production costs are more than $4,000 a tonne. LME tin hit $3,620 a tonne in February, the lowest price since the contract was reintroduced in mid-1989.
"The Asian market seems to be stable, but apparently that is not enough to prop up prices to a level which is good enough for us. The economies in the United States and Europe are recovering at a very slow pace," said Alwi.
"We can only hope that if the economies of the industrial countries improve, this will bring an improvement in metals prices, including tin," he added.
Traders said main consumers Japan, Taiwan and South Korea retained an appetite for tin. Japan's Finance Ministry reported in August tin imports reached 2,651 tonnes in July, up from 2,521 tonnes in June, and 1,823 tonnes in July 2001.
Sagging prices and a concentrate shortage have prompted China's top tin producer, Yunnan Tin Co Ltd , to halt production at its new Ausmelt smelter for the next two months.
Yunnan Tin, which said in mid-August it expected to produce 28,000 tonnes this year against 22,000 tonnes last year, may lose 3,000 to 4,000 tonnes due to the suspension. Its officials said it lacked concentrates due to an Indonesian export ban.
Indonesia halted exports of tin ore and concentrates in June to quell the illegal mining and smuggling blamed for the oversupply in global markets.
Tin ore, illegally mined in Bangka and the nearby island of Belitung, was smuggled to Singapore last year before reaching smelters in Thailand, Malaysia and China, traders said.
"The export ban is still effectively implemented. We are working together with related officials to prevent smuggling," Alwi said. (*)