ASEAN KEY DESTINATIONS
Indonesia closes tin tax loopholes
The latest government crackdown on the tin industry would help to damp some production and support benchmark prices, but the uncertain economic outlook would play a bigger role in the market, analysts said on Friday.
A senior trade official said on Thursday that Indonesia, the world’s top refined tin exporter, was looking to revise its royalty payments made on all domestic tin shipments to close a tax loophole and bring these in line with existing charges on exports.
The Trade Ministry is now working on a revision of the decree on tin exports, which could merge the previous domestic tin trade regulations with those for international exports, said Deddy Saleh, director general of foreign trade at the ministry.
“They [Indonesia] are constantly trying to plug up the holes in the dyke, so it’s just more of the same,” said David Thurtell, metals analyst at Citi in Singapore. “If it works — and there has been significant leakage — that would tend to perhaps discourage some production — particularly the high-cost marginal stuff.”
Tin, which is used in electronics, plating and lead-free solders struck a record high above $33,000 in April.
A crackdown on illegal mining, tighter export regulations, declining onshore reserves and rains that limited production helped drive the tin rally earlier this year. On Friday, benchmark tin on the London Metal Exchange was at $23,000 a metric ton, up from $22,750 at the close on Thursday.
“It is mildly [positive for prices] but it could be massively outweighed by the deteriorating outlook for the world economy,” Thurtell added.
Smelters in Indonesia are only allowed to export tin if they can produce refined tin with minimum purity of 99.85 percent and source ore from legal mines or team up with miners with permits. By revising the current tin export rule, the government is trying to ensure tin metal exports meet the 99.85 percent condition whatever its shape, be it bars, wires, statues or kitchenware.
“I am not sure if that will regulate tin exports,” a Singapore-based metals merchant said. “Knowing the players in the market, documents will be fudged to show ingots as 99.85 [percent] minimum purity.”
Tight supplies and resilient demand will keep tin prices high this year, despite the impact of the March 11 earthquake on big consumer Japan, a poll of metals analysts showed in April, before recent recession fears emerged. Last week, the Indonesian Tin Industry Association said an environmental crackdown in the main tin producing region of Bangka island was hindering domestic smelters’ supplies.
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