Smelters Split As New Tin Trading Rules Begin In Indonesia
JAKARTA: Tin producers in Indonesia, the world's top exporter of the refined metal, are split over new rules forcing them to trade on a domestic exchange, threatening government plans to boost the nation's profile in commodities markets.
The Southeast Asian nation has introduced a raft of new measures to boost industrial activity and export higher value processed goods, rather than raw materials, across a range of commodities.
Under new rules that took effect on Friday, all 47 registered tin ingot exporters must now trade on a domestic exchange before shipping material, as part of plan for Indonesia to set its own price benchmarks for the solder material.
The government wants only one exchange, but tin exporters are backing two rival contracts in a move that is likely to make it more difficult to attract liquidity to challenge benchmarks such as the dominant London Metal Exchange (LME) contract .
The Indonesia Commodity and Derivatives Exchange (ICDX), which launched its contract a year ago, has attracted five tin selling members, including the world's largest integrated tin miner and state-backed PT Timah.
The rival Jakarta Futures Exchange (JFX) plans to launch a physical tin contract from next month and has the backing of 22 registered tin exporters, accounting for a majority of tin output, officials said.
Already facing an uphill task to attract enough liquidity to challenge the LME benchmark, the smelter split could create more confusion and uncertainty at a time when exports of tin have been hit by new purity rules.
"Currently, COFTRA is prioritisising the approval of only one local exchange which will trade a physical tin contract for export," Robert James Bintaryo, secretary of Commodity Futures Trading Regulatory Agency (COFTRA) told Reuters this week.
The ICDX, which launched Indonesia's only physical tin contract last year, is favourite to be given government and regulatory approval, sources said, because it has already been trading a tin contract.
"The Government is clear," Megain Widjaja, ICDX's chief executive said in an email response to questions from Reuters. "There will be only one tin exchange, which is ICDX."
Widjaja has previously warned that tin sellers will face court action if they don't comply with the new rule to trade through an Indonesian exchange.
The JFX was pressing ahead with its plans to launch its tin contract in September, with 22 registered tin exporters expected to rise to 30, JFX Director Bihar Sakti Wibowo said.
Refiners currently sell their ingots through spot sales on international exchanges and via long-term contracts with end-users in countries including Singapore, Malaysia, China, South Korea, Netherlands, Taiwan and Japan.
Last year, Indonesia's total refined tin exports rose almost 3 percent to 98,817 tonnes, with top tin miner PT Timah contributing about 30 percent.
The ICDX contract was last quoted at $22,600, or $1,250 above the LME price of $21,350, which is down around 9 percent this year. - Reuters