Bloomberg reported that trade on the Indonesia Commodity and Derivatives Exchange (ICDX) was weak due to the country’s tin producers holding out for sales above the benchmark spot rate in London to try to counter a decline in prices.
Citing almost a USD$400 premium, smelter members on the ICDX were offering prices between USD$500 – USD$600 a metric ton above the contract on the London Metal Exchange.
The opinion from Peter Kettle of International Tin Research Institute (ITRI) was that Indonesian sellers were not prepared to follow the London Metal Exchange price down.
David Lennox, a resource analyst at Fat Prophets commented that the Indonesian members could be testing the market and if the reaction was positive then maybe there was some underlying strength in the market.
The Bloomberg article also said smelters don’t want to sell cheap because ore prices are very high and prefer to build up stockpiles, on expectations that the price will rise to a decent level, probably at USD$23,000 a ton.
The decision was defended by Jabin Sufianto, chairman of Association of Indonesian Tin Exporters, stating that the weak trade on the ICDX was simply because of the price.
Trade on the ICDX totalled 4,855 tons in August, 3,810 tons in July and 4,660 tons in June, exchange data show. On September 11 cargoes of the metal were sold above the London price and prior to that the last trade was on August 27, when the PB300 contract, the most active, was at $22,080 a ton. That was $398 above the LME spot price that day, Bloomberg calculations show. Inventories tracked by the LME climbed 4.4 per cent to 12,295 tons in August. The reserves dropped 1,085 tons to 10,210 tons yesterday, the lowest since May, according to LME data compiled by Bloomberg.
Implemented by the Indonesian government, the minimum price for tin contracts is decided by an exchange committee in the ICDX daily. Sales made through an auction system can’t be made below this daily rate, which is officially known as the Suggested Opening Bid.
According to BNP Paribas SA, it is reported that the global demand for tin will outstrip supplies for a fifth year in 2014. The market will have a global deficit of 13,000 tons this year and 10,000 tons in 2015.
Source Bloomberg: Tin Smelters in Indonesia Holding Out for Premiums to LME