Future
of tin industry after Indonesian Tin Exchange
Alexander Senaputra ;
The writer, studying extractive
metallurgy for his PhD. at Curtin University, Australia, is a freelance process
engineer for several mining companies in Indonesia
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JAKARTA
POST, 17 Maret 2014
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About
half a year ago, Indonesia shook the world by announcing that from September
2013, tin trading for export must be done within a bourse called the
Indonesia Tin Exchange (INATIN), pursuant to Trade Ministerial Regulation No.
32/2013.
It was
said that the ultimate objective of INATIN was to provide an equitable
trading platform by which product quality, transactions and shipments would
be guaranteed by the third party. In addition, the government can also easily
access transaction records, ensuring that any tin sold does not originate
from illegal mining or processing and that royalties are paid as required.
Historically,
INATIN is the first mineral commodity market to be set up in Indonesia, which
effectively controls all relevant exportation. It was born as part of the
Indonesia Commodity and Derivatives Exchange (ICDX), which aims to create an
INATIN-like platform for other mined products (such as thermal coal). A lot
of things have happened since INATIN went public.
During
the first few months, a significant level of resistance came from tin
producers. Their virtual hysteria was hardly surprising, as INATIN stipulates
high product purity (99.9 percent) and requires transactions to be completed
through an appointed clearing house, Identrust Security International.
A couple
of weeks ago, INATIN made another bold move toward the idea of applying a
minimum benchmark price for tin products available on such a bourse, to
ensure that producers’ profits do not suffer by trading in the market.
Looking at statistics, where about 30 percent of the world’s tin supply comes
from Indonesia, there is a possibility that Indonesia will for the first time
in its modern history be able to “control” the price of a commodity.
At the
moment, it is too early to say whether the battle will be won without a
fight. There are at least three other bourses in the world that trade tin:
the London Metal Exchange (LME), the New York Mercantile Exchange (NYMEX) and
the Kuala Lumpur Tin Market (KLTM). Consumers can find alternative supplies
on the other bourses. However, the stocks on the alternative bourses are also
dependent on the state of the global tin industry.
Despite
the complexity in global supply and demand, which is obviously beyond
anyone’s control, the future of Indonesia’s tin industry is bright if INATIN
can protect the producers from price dips. Whether this will be achieved or
not will be seen from the volume of tin traded (bought) on INATIN in the next
six-12 months after the minimum benchmark price is applied. In the meantime,
there are several other issues facing tin producers.
Tin is
traded in different forms and specifications, such as tin ingot, tin solder
and tin chemicals, for various product developments. Although tin ingot is
the primary product of Indonesia’s tin industry based on the volume traded,
other variants have comparable or higher nominal prices, making them of equal
importance to tin ingot. So far, these non-ingot products have not been
listed yet on INATIN, leaving tin producers confused as to how much must be
traded. A similar issue applies to the small amount of tin ingot sold to the
domestic market
According
to an article published by Reuters (Feb. 19, 2014), the volume of tin solder
exported from Indonesia increased from 756 tons in October 2013 to 1,460 tons
in January 2014. There is some skepticism that tin ingot was claimed as tin
solder and exported bypassing INATIN. The government noticed this and reacted
accordingly.
An
internal source with one of the tin producers mentioned that Indonesian
customs officers were now very strict when dealing with non-ingot products,
and their circumspection sometimes created delays to shipments. This
tardiness may make Indonesia’s non-ingot products less competitive amid
similar products from other countries.
This
condition will probably remain unchanged until next year, since some
hot-off-the-press news mentioned that tin derivatives other than ingot would
be listed on INATIN sometime in 2015 (Detikfinance, March 12, 2014). The
problem associated with non-ingot products is likely to be more relevant to
the government than to INATIN, being a private entity. The government was
expected to eradicate all uncertainties in every aspect of tin trading from
INATIN’s first day in operation.
In his
award-winning book titled The Plundered Planet, Paul Collier, an English
economist who was also director of the Development Research Group at the
World Bank, said the rule of thumb for non-renewable natural resources was
“nature + technology + regulation = prosperity”.
Having
the second-largest tin reserves in the world, and with the processing
technologies to generate various products — including the most advanced (such
as tin chemical for PVC stabilizer) — Indonesia, with the help of the right
regulations, will be able to obtain optimum benefit from the exploitation of
their tin deposits. In fact, what happens in the tin industry and INATIN will
be the first measure of how other mineral products can successfully be traded
in a domestic commodity market. ●
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