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Jakarta. State-owned Timah, the world’s largest exporter of tin, has halted sales on the spot market to focus on talks with contractual buyers about renegotiating shipments, as production has been hard hit by the unusually wet weather.

Corporate secretary Abrun Abubakar said on Tuesday that Timah was expected to miss its production target this year because of heavy rains and was trying to renegotiate supplies with long-term customers.

He said Timah may produce 40,000 metric tons this year, short of the 45,000-ton target. Spot sales, which normally account for 20 percent to 30 percent of volume, have been halted, he said, forecasting further gains in prices.

Timah said last week that it would be unable to meet all of its contractual supply obligations.

The production shortfall underscores a supply squeeze in the global market that has made tin this year’s best performer on the London Metal Exchange, with the price reaching a record earlier this month.

Barclays Capital has predicted a 15,000-ton shortage next year, the biggest since at least 2003. Timah accounted for 43 percent of Indonesia’s output in 2009.

“We are in talks with buyers,” Abrun said. “We’re asking them to renegotiate shipments.”

Tin, used as a solder and in packaging, has rallied from a low of $9,700 in December 2008, when the global financial crisis slashed demand.

The metal for delivery in three months touched a high of $26,790 a ton on Oct. 6, and traded at $25,700 in Singapore on Tuesday, down 1.9 percent.

About 70 percent of sales are usually made on a contractual basis, with the rest made in the spot, or cash, market.

“Now we’re only focusing on meeting long-term contracts to our loyal buyers, no more spot sales,” Abrun said. He said Timah, based in Pangkal Pinang, Bangka-Belitung, sold most of its production to Japan, South Korea and Singapore.

Timah shares fell 4.5 percent to Rp 3,200, its steepest decline since June 7, making it the worst performer on the LQ-45 Index, which tracks the Indonesia Stock Exchange’s (IDX) 45 most-traded stocks.

A La Nina weather event has brought heavier-than-usual rainfall to parts of Australia and Asia this year.

The downpours have hurt tin production and have also been blamed by industry groups in the country for lower output or missed forecasts for cocoa, coal and coffee.

Tin output from China may be restricted until the end of the year because of limitations on power use, industry group ITRI said on Sept. 29.

And a general ban on mining was also imposed last month in three eastern provinces in the Democratic Republic of Congo, Africa’s largest producer.

Tin stockpiles tracked by the LME dropped 54 percent this year, falling to a 17-month low of 12,255 tons on Monday.

Exports from Indonesia declined for the first eight months of this year to 60,107 tons from 67,798 tons a year earlier.

“If we see the production problems in Indonesia, and also the declines in tin stockpiles on the LME, tin prices most likely will keep rallying,” Abrun said.

Timah produced 45,086 tons of tin last year, according to the company’s Web site.

Indonesia’s total output that year was 105,000 tons, according to an estimate from the Energy Ministry.

 

Bloomberg