Indonesian Tin Assn plans to stabilise tin prices. Anyone uneasy?

There was a familiar tone to comments made by the Indonesian Tin Assn (ITA) last week as it outlined plans to launch a tin market on Bangka Island to all those who remember the international tin crisis, which began in 1985.

The proposal follows the slump in international tin prices, and a corresponding ban on Indonesian tin exports that will be in force until prices rebound.

“Tin prices are being speculated on by the fund managers. We hope to act as a stabiliser to indicate to the market the real demand and supply,” ITA president-elect Hidayat Arsani said.

As yet, it is unclear what form this stabilisation might take, but the sentiment itself may be of some concern to those who remember the 1985 tin crisis.

In the run-up to that crisis, producers made an agreement – several, actually, over a period of years – to “stabilise” the tin market by buying up stock when prices dipped, and selling when prices rallied too far or too fast.

Consumers consented to the agreements too, though Germany and the USA had dropped out by the time the crisis struck.

Then, as now, consumers seem to support the arrangement, and end-users are keen “to ensure a stable supply for their tin needs”, a second industry source said.

The impetus behind the formation of the Bangka market – improving the fortunes of impoverished producing nations – might also be familiar to those who can remember the UN-backed ITC.

In 1985, end-use substitution put paid to the idea that producers could define a floor for tin prices independently of demand conditions, setting in motion a crisis that would come to define the modern metals market.

In 2011, the tin market probably faces broader threats than the rise of the aluminium can and, as the industry source recognised last week, now may not be the best time to talk about “stabilising” prices.
“But in the long term, when the economy picks up, there is no doubt this will be a great move to benefit the tin producers in Indonesia, and the Bangka tin market may be a better reflection of global tin prices,” the source said.

Hotline awaits further developments with mounting trepidation.