Tambang Timah forced to renegotiate supply

Tambang Timah forced to renegotiate supply

SINGAPORE (Dow Jones): Indonesia's PT Tambang Timah, the world's largest tin producer, is forced to re-negotiate and reduce contracted supplies to its customers as a result of the company's decision to cut output by 5,000 metric tons in 2000, Prasetyo, the company's corporate secretary told Dow Jones Newswires Wednesday.

Tambang Timah expects tin output to decrease to 35,000 tons in 2000 from a total production of 40,000 tons in 1999.

When the company signed the 2000 contracts, the deals were still based on the assumption that it would produce 40,000 tons this year, Prasetyo said.

Because of the decision to reduce output, the company has to "rationalize the commitments" to its buyers, he said.

He added that all the company's customers will be affected by the decision, including those in Japan and South Korea, Tambang Timah's biggest buyers, who account for 30 percent of its total production.

"That's bad for all of us," he said, adding that Tambang Timah used to "consistently" supply such big consumers with good quality products.

He said that the decision would slightly damage customer relations.

Tambang Timah won't extend contracts with two U.S. trading houses whose existing contracts will end in June, he said, but added that the amount involved "isn't that great."

Under such circumstances, the company's priority is to supply endusers rather than traders, he said.

A trader with a large Japanese trading company in Tokyo said his company has to suffer a 5 percent cut in monthly supplies from Tambang Timah between June and December. The two parties had previously signed an annual contract for 6,000 tons, he said.

The trading house will have to buy from China to make up for the losses, he said.

Prasetyo said he isn't clear about the specifics of the supply reduction for each customer.

Earlier this year, Tambang Timah decided to reduce its 2000 tin production partly because the company's first-quarter output failed to meet its original target for the period, Prasetyo said.