Tumbling Indonesian tin exports could short-circuit electronics industry

"Tin buyers are becoming increasingly nervous about securing enough of the metal in coming months to supply industries such as electronics, after new Indonesian trading rules cut shipments by the world's biggest exporter".

"More than half of global tin goes into solder used in electronics, to make circuit boards for products ranging from smartphones to tablets produced by firms such as Blackberry  and LG Electronics. Tin is also widely used in food packaging as a protective coating to line containers.

Fearing disruption, tin suppliers snapped up record Indonesian stocks in the first half of the year, and have ample metal on hand for the next one to two months, traders said.

Further out, however, there could be a threat to the operations of electronics makers if export problems persist.

"The biggest issue is for the consumers in Asia, where Indonesia is two thirds of supply in some cases," said Peter Kettle of global industry group ITRI.

"For somewhere like Japan or Korea,Indonesia is absolutely critical and there is just not enough tin around from other sources to replace it," he added.

A major Japanese solder maker, which buys tin from Indonesia, said it was carefully watching how things develop.

Indonesia brought in new rules on August 30 to force tin ingot shipments to trade via a local exchange before export. The new policy aimed at giving Jakarta greater influence over prices has slashed trade and meant that the long-established process of buyers and sellers agreeing term deals has stalled.

PT Timah TINS.JL, Indonesia's biggest tin exporter, in late August declared force majeure on shipments as its buyers had not joined the Indonesian Commodity and Derivative Exchange (ICDX), the only approved exchange for tin trade.

The stand-off with tin buyers, some of whom are reluctant to use an exchange still establishing itself, helped push September exports down to 786 tonnes last month, from more than 6,000 tonnes in August, the lowest since early 2007.

Benchmark tin prices on the London Metal Exchange have climbed by more than 10 percent since late August as buyers stocked up due to worries about Indonesian supply, helping make it the best performer in a weak base metals complex this year.

Some buyers are waiting things out in the hope that Indonesia relaxes rules to revive exports, to help cash-starved producers.

"People are worried about it but they're not panicking yet because recent history suggests that the Indonesians will find a way -- it's just a question of how long that takes," said Leon Westgate at Standard Bank in London".