London 25/02/2016 - Indonesian tin smelter Refined Bangka Tin (RBT) will cease production and trading of metal but its inventories of off-warrant stock holdings could pose a downside risk to tin prices and premiums, sources told FastMarkets.
RBT, Indonesia's largest independent tin smelter, produced around 5,000 tonnes of LME-brand metal last year, according to ITRI, but has capacity of around 12,000 tonnes per year, according to other sources.
"Their [official export plan] for this year is 12,000 tonnes - they are the biggest private smelter in Bangka," a smelter source in Indonesia said.
Since news broke of the closure through a shareholder interview with Reuters on Monday, LME three-month tin has risen two percent to $16,025 per tonne against a backdrop of falling commodities prices.
Tomy Winata, Indonesia's 25th richest man and a conservation enthusiast, told Reuters that RBT's tin smelting plant was being shuttered because the company had failed to meet environmental criteria set out by the government.
But FastMarkets sources maintain that the reason for RBT's dissolution was internal factors at the company and between shareholders rather than the company falling foul of the law.
"It's an internal decision; there have not been environmental checks recently or new regulation on the environment," a second smelter source on the island said. "RBT was one of the first few companies to be compliant with C&C even before it was in effect."
RBT declined to comment on the shutdown when twice contacted by FastMarkets reporters.
But while the news that the tin market will lose several thousand tonnes of annual supply has boosted prices, RBT's exit could pose a downside risk, with the company currently holding substantial stocks of tin in Singapore warehouses, well-placed sources told FastMarkets.
The RBT stocks have been sitting off-warrant for a while in the hope for higher prices but quick quickly pile pressure onto the physical market should RBT's closure necessitate the quick liquidation of that position, sources said.
Physical premiums for 99.9 percent purity tin basis in-warehouse Singapore are currently low at $60-90 per tonne while rates on 99.99 percent purity 'four-nines' tin are $100-200 per tonne in the same location.
(Editing by Mark Shaw)