Timah predicts tin prices will stay at current levels

Timah predicts tin prices will stay at current levels

Rendi A. Witular, The Jakarta Post/Jakarta

State PT Timah, the world's largest integrated tin miner, said
tin prices were unlikely to get stronger next year despite higher
global demand, due to rampant illegal trade of metal.

Timah finance director Wachid Usman said tin prices were
projected to stand at between US$8,000 and $9,000 per ton next
year, more or less the same as this year's average, with demand
expected to increase by 5 percent to 280,000 tons.

"Illegal tin mining and trading activities by local
businessmen on Bangka island to traders in Singapore will flood
the market with cheap illegal tin, which will eventually halt tin
prices from increasing," said Wachid.

Bangka island, located off the coast of Sumatra, has the
world's largest tin deposits with some 420,000 tons of proven
reserves. The reserves, which are estimated to last for another
10 years, do not include those located offshore the island.

Wachid said the volume of illegal tin mining and trading was
unknown. However, the Bangka-based Timah said that the activities
over the past six years have caused the company to suffer a
potential loss of at least Rp 500 billion (US$55.5 million).

Moreover, the lack of raw tin material due to the widespread
illegal tin mining had caused Timah to lower its production
output this year to about 40,000 tons from 45,906 tons last year.

All this calamity started with the implementation of the
regional autonomy law, which allowed the Bangka-Belitung
provincial administration to issue licenses for local companies
to export tin, although the central government banned the export
of raw tin. This has mushroomed illegal mining and trade
activities on Bangka island.

Wachid said that the company had recently reported the problem
to State Minister of State Enterprises Sugiharto, who is expected
to discuss the matter with the Ministry of Home Affairs.

The Ministry of Home Affairs has the authority to scrap
regulations issued by local administrations.

"We expect the new government can enforce the law and help
regulate the tin mining activities on Bangka island. The flooding
of illegal tin in the global market is feared to ruin the already
strong tin prices," said Wachid.

Tin prices have surged 73 percent on the London Metal
Exchange this year to $9,150 a ton, following a higher global
demand of tin for solders to bind electronic components.

The average price of tin received by the company during the
third quarter of this year was $9,178 per ton, which was 93
percent higher than the same period last year. The average price
during the first nine months of this year was $8,193 per ton or
72 percent higher than the same period last year.

Wachid said the rise in tin prices were triggered by a
decision from the European Union (EU) to ban the use of lead for
solders starting in 2006 due to environmental concern. The United
States and Japan were expected to follow the EU's decision.

"We have received an increasing request from electronic
producers in Japan, South Korea and Taiwan due to the EU
regulation. We will focus on that market for next year," said
Wachid.

Solders are expected to account for about 60 percent of global
tin demand next year, with the remaining from food-can makers.

Food-can producers are likely to avoid tin and turn to
aluminum and tin-free steel for their raw materials next year due
to environmental reasons.