About half a year ago, Indonesia shook the world by announcing that from September 2013, tin trading for export must be done within a bourse called the Indonesia Tin Exchange (INATIN), pursuant to Trade Ministerial Regulation No. 32/2013.
It was said that the ultimate objective of INATIN was to provide an equitable trading platform by which product quality, transactions and shipments would be guaranteed by the third party. In addition, the government can also easily access transaction records, ensuring that any tin sold does not originate from illegal mining or processing and that royalties are paid as required.
Historically, INATIN is the first mineral commodity market to be set up in Indonesia, which effectively controls all relevant exportation. It was born as part of the Indonesia Commodity and Derivatives Exchange (ICDX), which aims to create an INATIN-like platform for other mined products (such as thermal coal). A lot of things have happened since INATIN went public.
During the first few months, a significant level of resistance came from tin producers. Their virtual hysteria was hardly surprising, as INATIN stipulates high product purity (99.9 percent) and requires transactions to be completed through an appointed clearing house, Identrust Security International.
A couple of weeks ago, INATIN made another bold move toward the idea of applying a minimum benchmark price for tin products available on such a bourse, to ensure that producers' profits do not suffer by trading in the market. Looking at statistics, where about 30 percent of the world's tin supply comes from Indonesia, there is a possibility that Indonesia will for the first time in its modern history be able to 'control' the price of a commodity.
At the moment, it is too early to say whether the battle will be won without a fight. There are at least three other bourses in the world that trade tin: the London Metal Exchange (LME), the New York Mercantile Exchange (NYMEX) and the Kuala Lumpur Tin Market (KLTM). Consumers can find alternative supplies on the other bourses. However, the stocks on the alternative bourses are also dependent on the state of the global tin industry.
Despite the complexity in global supply and demand, which is obviously beyond anyone's control, the future of Indonesia's tin industry is bright if INATIN can protect the producers from price dips. Whether this will be achieved or not will be seen from the volume of tin traded (bought) on INATIN in the next six-12 months after the minimum benchmark price is applied. In the meantime, there are several other issues facing tin producers.
Tin is traded in different forms and specifications, such as tin ingot, tin solder and tin chemicals, for various product developments. Although tin ingot is the primary product of Indonesia's tin industry based on the volume traded, other variants have comparable or higher nominal prices, making them of equal importance to tin ingot. So far, these non-ingot products have not been listed yet on INATIN, leaving tin producers confused as to how much must be traded. A similar issue applies to the small amount of tin ingot sold to the domestic market
According to an article published by Reuters (Feb. 19, 2014), the volume of tin solder exported from Indonesia increased from 756 tons in October 2013 to 1,460 tons in January 2014. There is some skepticism that tin ingot was claimed as tin solder and exported bypassing INATIN. The government noticed this and reacted accordingly.
An internal source with one of the tin producers mentioned that Indonesian customs officers were now very strict when dealing with non-ingot products, and their circumspection sometimes created delays to shipments. This tardiness may make Indonesia's non-ingot products less competitive amid similar products from other countries.
This condition will probably remain unchanged until next year, since some hot-off-the-press news mentioned that tin derivatives other than ingot would be listed on INATIN sometime in 2015 (Detikfinance, March 12, 2014). The problem associated with non-ingot products is likely to be more relevant to the government than to INATIN, being a private entity. The government was expected to eradicate all uncertainties in every aspect of tin trading from INATIN's first day in operation.
In his award-winning book titled The Plundered Planet, Paul Collier, an English economist who was also director of the Development Research Group at the World Bank, said the rule of thumb for non-renewable natural resources was 'nature + technology + regulation = prosperity'.
Having the second-largest tin reserves in the world, and with the processing technologies to generate various products ' including the most advanced (such as tin chemical for PVC stabilizer) ' Indonesia, with the help of the right regulations, will be able to obtain optimum benefit from the exploitation of their tin deposits. In fact, what happens in the tin industry and INATIN will be the first measure of how other mineral products can successfully be traded in a domestic commodity market.