In the future, Indonesia's tin resources will be concentrated to large-scale smelters.

By the end of 2021, Indonesia (hereinafter referred to as Indonesia) had tin reserves of 800000 tons, accounting for 16% of the world, with a reserve-production ratio of 15 years, lower than the global average of 17 years. The existing tin deposits in Indonesia are deeper, the grade is lower, and the tin production is greatly suppressed. At present, the mining depth of tin mine in Indonesia has decreased from 50 meters below the surface to 100m ~ 150m below the surface. The difficulty of mining has increased, and the output of tin ore in Indonesia has also decreased year by year, from a peak of 104500 tons in 2011 to 53000 tons in 2020. Although Indonesia remains the world's second-largest supplier of tin, its share of global tin production fell from 35 per cent in 2011 to 20 per cent in 2020.

As the second largest refined tin producer in the world, Indonesia's refined tin supply is very important, but Indonesia's total refined tin supply and supply elasticity show a downward trend.

First, Indonesia's raw ore export policy continues to tighten. In November 2021, Indonesian President Joko Widodo said he would stop Indonesia's tin exports in 2024. In 2014, the Indonesian Ministry of Trade issued Trade Regulation No. 44, banning the export of crude tin, which is intended to curb the cheap loss of a large number of tin resources and enhance the addition of its tin industry and the pricing right of tin resources. After the implementation of the law, Indonesian tin production has been reduced, and the matching ratio of Indonesian tin ore to refined tin production is only 0.9 in 2020.

As Indonesia's smelting capacity is lower than that of tin ore, domestic smelting capacity is difficult to digest the tin ore originally exported in the short term, so Indonesia's tin production has declined to meet the country's smelting demand. Since 2019, the matching ratio of refined tin production in Indonesia has been less than 1, while that in 2020 is only 0.9. The output of tin ore has been unable to meet the domestic production of refined tin.

Second, the overall decline in the grade of resources in Indonesia, facing the dilution of land resources, the difficulty of seabed mining has increased, and the output of tin ore has been restrained. At present, the submarine tin mine is the main part of the tin ore output in Indonesia, the submarine mining is difficult and the cost is high, and the tin production will also be affected seasonally.

Tianma is the largest tin producer in Indonesia, with 90 per cent of the land area approved to mine tin, and the company's coastal tin production accounts for 94 per cent. However, due to the mismanagement of Tianma, its mining land has been overexploited by a large number of small private miners, and Tianma has been forced to strengthen its control of mining rights in recent years. At present, the company's tin production is more dependent on undersea tin mines, and the proportion of coastal tin production has increased from 54% in 2010 to 94% in 2020. By the end of 2020, Tianma's high-grade onshore tin ore reserves are only 16000 tons.

The tin metal output of Tianma Company shows a downward trend as a whole. In 2019, Tianma's tin output reached 76000 tons, an increase of 128% over the same period last year, a higher level in recent years. This is mainly due to the implementation of new export regulations in Indonesia in the fourth quarter of 2018, which allowed Tianma to obtain the production of illegal miners in statistical terms, but the company's actual tin production capacity did not increase. Since then, Tianma's tin production has continued to decline, with refined tin production of 19000 tons in the first three quarters of 2021, down 49 per cent from a year earlier.

Third, private small smelters have become the main force of refined tin supply in Indonesia. Recently, Indonesian tin ingot exports recovered from the same period last year, mainly due to the growth of tin ingot exports from private smelters. By the end of 2020, the total tin refining capacity of Indonesia's private smelters was about 50,000 tons, accounting for 62 percent of Indonesia's total production capacity. A remarkable feature of tin mining and refined tin mining in Indonesia is that most of them are small-scale production by private enterprises, and the output will be flexibly adjusted according to the price level. When the tin price is high, small enterprises immediately increase production, and when the tin price falls, they choose to close production capacity, so the output of Indonesian tin ore and refined tin is more volatile and less predictable.

In the first three quarters of 2021, Indonesia exported 53000 tons of refined tin, an increase of 4.8% over the same period in 2020. The author believes that refined tin exports from local private smelters have made up for the decline in refined tin production of Tianma Company. But it is worth noting that private smelter capacity expansion and actual exports will continue to be subject to increasingly stringent environmental scrutiny in Indonesia. As of January 2022, the Indonesian government had not issued a new tin export license through the exchange.

The author believes that in the future, Indonesian tin resources will be more concentrated to large smelters, the possibility of substantial increase in refined tin output of small enterprises will become smaller and smaller, refined tin output will tend to be stable, and output elasticity will decline systematically. With the decline of the grade of the original tin mine in Indonesia, the small-scale production mode of small enterprises is becoming more and more uneconomical, and a large number of small enterprises will be cleared out of the market. After the introduction of the new mining law in Indonesia, the supply of raw tin ore will flow more to large enterprises, resulting in a "crowding-out effect" on the supply of raw tin ore in small smelting enterprises.

Author: Wang Jianrun