Oct 12 (Bloomberg) --PT Timah, the world’s largest tin exporter, may miss a production target this year because of heavy rains and the Indonesian company is trying to renegotiate supplies with long-term customers, according to an executive.

State-owned Timah may produce 40,000 metric tons this year compared with a target of 45,000 tons, Corporate Secretary Abrun Abubakar said in an interview today. Spot sales, which normally account for 20 percent to 30 percent of volumes, have been halted, he said in Jakarta, forecasting further gains in prices.

Timah’s production shortfall underscores a supply squeeze in the global tin market that’s made the metal this year’s best performer on the London Metal Exchange, with the price reaching a record earlier this month. Barclays Capital has predicted a 15,000-ton shortage next year, the biggest since at least 2003.

"We are in talks with buyers in case we’re going to miss production due to bad weather, how much that can be reduced from our contracts,” Abubakar said. "We’re asking them to renegotiate shipments,” he said.

Tin, used as a solder and in packaging, has rallied from a low of $9,700 in December 2008, when the global financial crisis slashed demand. The metal for delivery in three months touched an all-time high of $26,790 a ton on Oct. 6, and traded at $26,000 at 1:16 p.m. in Singapore today, down by 0.7 percent.

No More Spot Sales

About 70 percent to 80 percent of sales are usually made on contractual basis, with the rest made in the spot, or cash, market, Abubakar said. "Now we’re only focusing on meeting long-term contracts to our loyal buyers, no more spot sales.”

Timah, based in Pangkal Pinang, Bangka-Belitung province, sells most of its production to Japan, South Korea and Singapore, Abubakar said, declining to identify individual customers. Bangka-Belitung is Indonesia’s main tin-producing region.

Shares in PT Timah dropped as much as 4.5 percent to 3,200 rupiah today, the worst performers on the LQ-45 Index, which tracks the market’s 45 most-traded stocks. The stock has jumped 61 percent this year, beating the 40 percent gain in the benchmark

Jakarta Composite Index.

A La Nina weather event has brought heavier-than-usual rainfall to parts of Australia and Asia this year, including Indonesia, Southeast Asia’s largest economy. The rains have hurt tin production, and also been blamed by industry groups in the country for lower output or missed forecasts for cocoa and coal.

Tin output from China may be restricted until the end of the year because of limitations on power use, industry group ITRI Ltd. said Sept. 29. A general ban on mining was also imposed last month in three eastern provinces in the Democratic Republic of Congo, Africa’s largest producer.

Tin stockpiles tracked by the LME dropped 54 percent this year, falling to a 17-month low of 12,255 tons yesterday. Exports from Indonesia declined for the first eight months of this year to 60,107 tons from 67,798 tons a year earlier, the Trade Ministry said on Sept. 22.

"If we see the production problems in Indonesia, and also the declines in tin stockpiles on the LME, tin prices most likely will keep rallying,” PT Timah’s Abubakar said.