Bruised by purity rule, Indonesia tin exporters face trading overhaul – by Michael Taylor and Yayat Supriatna (Reuters India – July 12, 2013)

JAKARTA, July 12 (Reuters) – Indonesia’s plans to force tin producers to trade through a domestic exchange could be a new source of disruption for shipments by the world’s top exporter, coming just as firms are trying to meet new tin purity rules, industry sources said.

The Southeast Asian nation has been trying to boost its profile in commodities markets in the hope of setting its own price benchmarks, but so far has faced an uphill task to attract enough liquidity to challenge benchmarks on overseas exchanges.

Under the new rules, all 51 registered tin exporters must trade on a domestic exchange after August 29. The trading plan is in addition to new rules brought in this month to raise minimum purity levels for tin exports to 99.9 percent, which are already expected to slash exports over the next few months, potentially lifting tin prices.

The Indonesia Commodity and Derivatives Exchange (ICDX) launched the country’s only physical tin contract last year, although it has struggled to challenge the dominant London Metal Exchange (LME) contract. “The new trading rules will promote sustainable tin mining, (and) will be good for producers and Indonesia,” said Megain Widjaja, ICDX’s chief executive, assuring there could be a transparent market with a fair price for producers and buyers.

But he said sellers faced court action if they didn’t comply with the rule to trade through an Indonesian exchange.

Only two tin producers were currently ICDX members, state-backed PT Timah and PT Refined Bangka Tin, though sellers who were not members could sign agreements with members to trade, said Widjaja.

The ICDX has warehouse space for 10,000 tonnes and its four registered buyers for its tin contract are Toyota Tsusho , Daewoo, Noble Resources and Gold Matrix Resources, he said.

After trading 116 lots in 2012, business on the ICDX’s INATIN contract has dried up this year with no trade. In comparison, the LME’s tin contract, which dates from 1877, has traded more than 60,000 lots so far this year.

The ICDX’s contract was expected to trade at a premium of about $300-$400 a tonne over the LME contract, due to its minimum purity requirement of 99.9 percent for the ingots traded.

But the Indonesian contract was last quoted at $22,600, more than $3,000 above the LME price of $19,543, which is down around 15 percent this year.

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