Thu, 27 Aug 2009
From: Reuters
JAKARTA, Aug 27 (Reuters) - Here is some background on the tin industry in Indonesia, the world's top exporter and second-largest producer after China. Indonesia produces nearly 30 percent of the world's refined tin.

MAIN PRODUCTION AREAS:

- Bangka Island, off Sumatra's east coast, is the world's largest tin-producing area. Neighbouring islands Belitung and Singkep are also rich in the metal.

- The Dutch East India Company started commercial tin mining on Bangka in the 19th century.

- The London Metal Exchange benchmark futures contract MSN3 duration of three months is based on the length of time 19th-century merchant ships loaded with tin took to reach Europe from Indonesia and Malaysia.

EXPORT RULES:

- The government controls tin mining and smelting on Bangka. - In 2002, Jakarta banned exports of tin ore to stop illegal mining from damaging Bangka's environment. The move led to the proliferation of small smelters.

- In October 2006, Indonesia shut down three tin smelters operating without permits on Bangka island, and announced new rules for tin miners.

- The government introduced rigid rules for tin exports in 2007 following the crackdown. Smelters are only allowed to export tin if they can produce refined tin with minimum purity of 99.85 percent and source ore from legal tin mines or team up with miners that have permits.

Since the introduction of tin export rules, the government has approved export permits for 27 smelters including PT Timah Tbk (TINS.JK), the world's largest integrated tin miner, and PT Koba Tin, a unit of Malaysia Smelting Corp Bhd (MSCB.KL)

INDONESIAN TIN PRODUCTION FIGURES:

2006 65,360 tonnes

2007 91,280 tonnes

2008 71,610 tonnes

2009* less than 90,000 tonnes

+ around 90,000 tonnes

* Government's estimate

+ ITRI's estimates

RESERVES

Indonesia has mineable tin reserve of 338,115 tonnes measured in terms of refined tin and deposits of 650,135 tonnes.

REGULATORY UNCERTAINTY:

- The government had planned to limit annual tin production to support prices and reduce environmental damage, but so far has not introduced any formal regulations.

The government has said it may not need to limit output as output is naturally declining due to weak demand. However, it has not completely shelved the plan.

SUPPLY CHAIN:

- From Indonesia the metal is shipped to Malaysia via Singapore, where it is given London Metal Exchange (LME) branding, and then sold on the Kuala Lumpur Tin Market or directly to consumers in Europe. It is also exported to Thailand.

- Tin is used in electronics, plating and lead-free solders. Source: Reuters, Energy and Mineral Ministry data. (Reporting by Fitri Wulandari; Editing by Michael Urquhart)



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