Indonesia is the world's second-largest tin producer after China. In 2006 it produced a total of 85,000 tonnes, 15,000 tonnes less than China. According to the global Tin Technology Authority (ITRI), artisanal mining in Indonesia accounts for a third of global tin production, and local independent smelters contribute some 20% of refined tin production, "but it is recognised that they operate in an unregulated manner with little environmental control and no land reclamation".
After October's crackdown, the Indonesian government introduced more stringent regulations in February this year, requiring tin exporters to register for licensing with the ministry of industry and trade and to meet requirements including producing receipts for royalty payments and making sure their tin meets a purity level of at least 99.85%. In addition, tin exporters are required to submit quarterly reports on their exports and give government-appointed surveyors access to check shipments.
According to a recent Fortis Merchant Banking metals report, "the crackdown is as much about the Indonesian authorities' determination to maximise revenues levied on tin exports as quality assurance". It added that the smaller smelters, which are the target of the new regime, are estimated collectively to produce about 60,000 tonnes of refined tin a year, "about the same as the combined efforts of Timah and Koba."
PT Timah, 65% owned by the government of Indonesia, is the world's largest tin producer. Peter Kettle, statistics and market studies manager for Tin Technology and ITRI, told OBG, "At the moment the situation in Indonesia is that PT Timah has expanded production and become highly profitable since the closures of independent small smelters last October."
PT Timah posted first quarter net profits for 2007 of $35.7m, which is 26 times higher than first quarter profits for 2006. The increase was a result of increased production and sales, as well as the higher price of tin. The company said that it received an average of $12,635 per metric ton in the first quarter, or 66% higher than the average price received in the same period of 2006.
Last month the company announced that it planned to increase production by 10,000 tonnes this year. "We have seen a global shortage in the past three months. We don't want to lose the momentum and every chance we have to boost sales, we will," Wachid Usman, the newly elected president director of PT Timah, told media.
In March, Indonesia's minister of energy and resources, Purnomo Yusgiantoro, told the ITRI that steps would be taken to ensure that the nation's output would be maintained at this year's expected rate of some 90,000 tonnes. This would be done, he said, through increased production by PT Timah, timely issue of licences to properly qualified independent smelters, and an examination of various options to make full use of PT Koba Tin's smelting capacity.
The February issue of the CRU Tin Monitor report says that of the estimated 90,000 tonnes, some 50,000 tonnes will come from PT Timah, 15,000 tonnes from PT Koba Tin and 25,000 tonnes from some of the larger independent smelters.
With regard to PT Koba Tin, Kettle said, "The second large producer, PT Koba Tin, is the subject of a police investigation of its ore purchasing and is currently operating at about a quarter of its capacity."
In April, Malaysia Smelting Corporation, which owns 75% of Koba Tin, issued a statement saying that the Ministry of Trade had granted a licence to PT Koba Tin Indonesia to export. At the end of April, the company resumed shipment of refined tin but would not confirm if regular shipments would resume.
To date, 12 tin exporters have received licences from Indonesia's ministry of industry and trade. "A group of independent smelters has recently been granted new export licences, but I don't think any of them have re-started production yet," said Kettle.