Indonesia Makes Progress in Cracking Down on Illegal Tin Mines, Expected to Ease Market Pressure

On June 2 (Monday), industry experts stated that Indonesia's progress in converting illegal tin mining assets into legal and productive operations could help alleviate the global supply tightness of this battery metal.

The growing popularity of electric vehicles (EVs) has increased demand for tin, a negative electrode material that enhances the performance of lithium-ion batteries. Indonesia is the world's second-largest producer of refined tin, but illegal mining has been a major issue in the industry.

According to local media reports, in April this year, Indonesian authorities seized five smelters suspected of involvement in illegal mining. These smelters will now be managed by the state.

The Attorney General's Office stated that the seizure was not intended to halt tin ore exploration, and it is expected that mining operations will resume soon under new management.

The crackdown on illegal mining has constrained Indonesia's 2024 production, exacerbating global supply tightness. Experts told S&P Global Commodity Insights that the expected restart of smelters would help increase supply to the tight market.

"We are currently seeing a recovery in Indonesia's production... We expect this recovery to continue into 2025 and beyond," Freddie Mitchell, a market intelligence analyst at the International Tin Association (ITA), said in an email.

According to the ITA, the seized smelters accounted for half of the country's refining capacity.

ITA data shows that due to the seizures, Indonesia's refined tin production in 2024 fell by 30.7% to 49,900 mt, the lowest production level in over two decades.

Before authorities tightened scrutiny of the industry, the country's annual refined tin production reached at least 72,000 mt in 2019 and from 2021 to 2023.

The ITA expects that with the conclusion of the Indonesian government's investigations, Indonesia's refined tin production will rise to 57,000 mt in 2025.

Inav Haria Chandra, a research analyst at PT OCBC Sekuritas Indonesia, said that Timah controls over 90% of Indonesia's permitted tin mining areas, but for years the company's production has only accounted for 30% to 40% of Indonesia's tin exports.

Changes are imminent in Indonesia's tin industry. The government has also expanded the SIMBARA tracking platform to include tin, aiming to trace the origin of this mineral from mine to export.

"This is the toughest action we've seen in years, and the government has started cleaning up the industry," Inav said.

However, it is still too early to say whether Indonesia can completely eliminate illegal tin mining.

"The government's recent crackdown is a positive step," Thomas Radityo, an equity research analyst at Ciptadana Capital in Indonesia, said in an email.

"However, for these efforts to have a lasting impact, sustained and effective enforcement will be crucial, which has historically been a challenge."

Despite the expected recovery of Indonesia's supply, regulatory hurdles have limited producers' ability to increase production. The new RKAB system, under which the Indonesian government approves domestic mining production and sales quotas, has strengthened oversight of miners but also slowed down the approval process.

Indonesian miners are also reconsidering new investments due to rising costs caused by recent increases in mineral royalties.

It is expected that developments in Indonesia will exacerbate volatility in the tin market.

Amid this volatility, the ITA forecasts a 7,600 mt supply deficit in the global refined tin market in 2025.

Mitchell from the ITA said, "Despite the recovery of Indonesia's supply, there are still supply disruptions elsewhere." (Wenhua Comprehensive)