INDONESIA – As Indonesia presses on with its new rule that requires tin to be traded on a local exchange before export, local tin smelters not yet in compliance have started to furlough staff.
The new law was implemented on 30 August with the aim of pushing Indonesia – the world’s largest tin exporter - forward to displace the London Metal Exchange to become the country setting the benchmark price for tin. Under the new rule, 47 registered tin ingot exporters must trade on a domestic exchange – the Indonesia Commodity and Derivatives Exchange (ICDX) in Jakarta - before shipping material.
Yet some critics say the rule gives ICDX monopoly control of tin trading in Indonesia. For example, the Jakarta Futures Exchange (JFX), a local commodities exchange market, recently had its request for a license rejected by the Commodity Futures Trading Regulatory Agency. Bihar Sakti Wibowo, a director at the JFX, said the exchange would reapply.
Tjahyono Mukmin, president director of Serumpun Tin – a group of 18 producers that want to see their output through the JFX – said the new rule is adversely affecting the domestic tin industry.
“It’s hard for us, some smelters have stopped operations and put workers on furlough,” said Mukmin. “If this continues, it will definitely have a big impact. People have no income because smelters stopped operation.
“It could slow the economy.”
Mukmin said the Serumpun Tin smelters have about 7,000 metric tons of ingots currently in storage in warehouses that they cannot export. He added that the smelters may join the ICDX if the regulatory rejects JFX’s application for a second time: “We cannot prohibit smelters of Serumpun Tin if they want to trade at ICDX.”
Tin has increased 10% to $23,350 per ton on the London Metal Exchange since the Indonesian rule was implemented. Analysts say the price might even average $25,000 next year.
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