Indonesian government backs tin export ban

"We support this voluntary ban so that tin prices will rise, which will benefit Indonesia's bargaining position in the industry," deputy economics minister Eddy Putra Irawadi told AFP.

Twenty-four tin producers plan to halt on October 1 all shipments from the production hub of Bangka Belitung, off the eastern coast of Sumatra island, the Indonesian Tin Association announced Tuesday.

Indonesia is the world's biggest tin exporter, with Bangka Belitung supplying an average 8,500 tonnes of tin per month to the global market, the association said.

The ban, triggered by a sharp decline in the price of the metal in recent months, will effectively cut 30 per cent of the world's supplies.

The price of tin surged by 7.3 per cent on Tuesday to $21,795 on news of the announcement, but slipped back 2.5 per cent to $21,250 a tonne Wednesday.

Exporters will resume shipments when prices return to normal, the tin association's deputy chief Rudy Irawan told local daily Kompas.

"If exporters keep their reserves, we hope that the tin price will reach $25,000 per tonne, which is the normal minimum," he said.

The economic turmoil in Europe has caused a slump in prices across commodity markets, including gold and copper.

"Until Tuesday, there was a rush for the door in anything risky. Basically anything that's not US dollars was under pressure," said Nick Trevethan, senior commodities strategist at ANZ Research in Singapore.

"If Indonesia is able to enforce this moratorium, it would be very supportive of prices. It's the biggest exporter in the world, producing around 90,000 tonnes a year."

Trevethan warned however that such a move will not resolve the pricing problem for tin, which is mostly used as solder for electronics.

"It may not have a long-lasting effect, even if it does squeeze the market for a short period. And they can't stop producing indefinitely."

Exporters are hoping the ban will be a blow to speculation on the London Metal Exchange, according to Johan Murod, head of one of the country's biggest producers, Bangka Belitun Timah Sejahtera.

"Speculative buyers have created a certain environment in the market, as if there were an oversupply of tin," he told Kompas.

"The fact is, buyers will now have to wait for eight months to get what they ordered."

Analysts said the ban is likely to upset bilateral relations with China, which consumes 44 per cent of the world's tin supply, much of which comes from Bangka Belitung.