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Selasa, 05 Juli 2011

Bear Market in Tin Ending as Shortages Mean PT Timah’s Profit Advances 55% - Bloomberg

By Glenys Sim and Yoga Rusmana
July 04, 2011 12:01 EDT

Erfandi’s fleet of bamboo rafts are dredging 33 percent less tin ore from the rivers of Indonesia’s Bangka Island than in 2008, as miners fail to keep pace with consumption that jumped 14 percent in two years.

The vessels operating in the world’s largest exporting nation are hauling up no more than 40 kilograms (88 pounds) of ore daily, from 60 kilograms, as reserves get depleted, said the 46 year-old foreman. Miners from China to Peru are also struggling to meet demand for the metal, used to solder components in almost all electronic equipment.

While commodity investors suffered their worst quarter in a year as wheat, cotton and crude retreated, prices will rebound because of shortages, a Bloomberg survey of analysts in June showed. Tin fell 23 percent from a record in April, entering a so-called bear market, and will rally 16 percent to $30,000 a metric ton by Dec. 31, a Bloomberg survey of 15 traders, analysts and smelters showed. The market will be in deficit for the fourth time in five years, Barclays Capital says.

“It’s a market where there’s not enough of the metal coming out of mines around the world,” said Nic Brown, the head of commodities research at Natixis Commodity Markets Ltd. in London who predicted higher prices last July, nine months before they reached a record. “If you remain positive on the basic growth story out of China, and the other developing countries, the fundamentals in the tin market have not changed that much.”

Fresh Fruit

Prices climbed 49 percent to $25,795 in the past 12 months on the London Metal Exchange. PT Timah, based in Pangkalpinang, Indonesia, will post a 55 percent profit gain this year, analysts’ estimates compiled by Bloomberg show. Dole Food Co., the world’s biggest fresh fruit and vegetable producer, said in May that it’s paying more for tinplate. The packaging material is made from sheets of iron or steel coated with tin.

Solder represents 52 percent of demand and tinplate 17 percent, according to ITRI Ltd., a St. Albans, England-based researcher. The metal is used in electronic goods and a high proportion of electrical appliances, ITRI said.

Tinplate prices rose as much as 15 percent to 20 percent in some countries in the past year, according to H.J. Heinz Co., which sells 1.5 million cans of baked beans every day in the U.K. alone. Each 415-gram (0.9 pound) container uses a third of a gram of tin, the Pittsburgh-based company said in an e-mail.

Global sales of electronic equipment rose 17 percent to $1.85 trillion in 2010 and may gain another 6 percent this year, according to Bannockburn, Illinois-based IPC, an association for suppliers to the industry.

“As long as there’s a circuit board, there will be tin,” said Wu Xiaofeng, an analyst at Shanghai Metals Market, which has more than 400 researchers.

Earth’s Crust

Tin is more than 31 times rarer than copper in the earth’s crust and the two metals were combined to make bronze as long as 5,500 years ago, according to the U.S. Geological Survey. This year, global demand may rise 0.5 percent to an all-time high of 366,000 tons, exceeding supply by 6,000 tons, Barclays Capital estimates. Based on last year’s average price, that would value consumption at almost $7.5 billion.

The metal advanced 166 percent since reaching a two-year low in December 2008 as demand rebounded from the worst global recession since World War II and floods cut Indonesian output. That outpaced the 156 percent gain in the London Metal Exchange Index of six metals and the 52 percent jump in the MSCI All- Country World Index of equities. Treasuries returned 4.1 percent, a Bank of America Merrill Lynch index shows.

Electronic Goods

The Standard & Poor’s GSCI gauge of 24 commodities fell 7.8 percent last quarter as wheat dropped 20 percent, cotton slumped 41 percent and oil retreated 11 percent. The index pared losses in the final three days, advancing 4 percent.

Sales of electronic goods and tin prices could slump should economies weaken. U.S. consumer confidence dropped to a seven- month low last month, the New York-based Conference Board’s sentiment index showed. Federal Reserve Chairman Ben S. Bernanke said June 22 that part of the slowdown in the world’s biggest economy may be “longer lasting.”

More than two-dozen countries raised interest rates this year to cool inflation. China, the world’s biggest tin consumer, increased rates four times since October to contain prices that gained 5.5 percent in May from a year earlier, the fastest pace since 2008. Japan entered its third recession in a decade in the first quarter.

“The global macroeconomic environment is the greatest risk the market faces,” said Liang Haisan, a Shanghai-based analyst at Citic Newedge Futures Co., a venture between Citic Group, China’s biggest state-owned investment company, and Newedge Group. “China won’t be spared from a global slowdown.”

Economic Slump

Another economic slump would slash demand for tin, driving prices as low as $22,000 by the end of the year, according to the median estimate of 11 people in Bloomberg’s survey. That would still be 87 percent higher than the average over the last decade, data from the London Metal Exchange show.

Inventories monitored by the LME suggest there is no supply crunch yet, after gaining 37 percent to 22,305 tons this year. There are also signs that trend may reverse. Orders to remove metal from warehouses, known as canceled warrants, rose fivefold on June 28 to the highest level since April 2010, LME data show.

Increasing inventory is no bar to rising prices. Warehouse stockpiles had jumped 15 percent this year when the metal traded at the all-time high of $33,600 on April 11.

Immediate Delivery

Part of the increase in inventories may have been caused by LME prices trading at a premium to those in China, spurring exports, according to CRU, a research company based in London. That premium no longer exists, CRU says. LME tin for immediate delivery averaged $1,579 a ton more than Chinese prices from October through mid-April, according to Bloomberg calculations.

Demand is poised to rise because the world economy is still expanding. U.S. growth will accelerate to 3.2 percent this quarter, from 2.3 percent in the prior three months, the median of 68 economists’ estimates compiled by Bloomberg show. The world economy will expand 4.3 percent this year and 4.5 percent in 2012, the International Monetary Fund said June 17.

Demand for electronic goods is accelerating. Global sales of mobile-phone handsets will rise about 12 percent to about 1.8 billion units this year, Gartner Inc., a Stamford, Connecticut- based researcher, said in a May report. Shipments of tablet computers will advance 12-fold from 2010 to 2015, IHS iSuppli, an El Segundo, California-based researcher, said in February.

Chinese requirements may rise 6.8 percent to 157,000 tons this year, compared with domestic supply of 155,000 tons, according to Ran Jun, a senior analyst at Antaike Information Development Co., a state-backed research group.

Trade Ministry

Shipments from Indonesia were worth $1.71 billion last year, from $1.25 billion in 2009, according to the trade ministry. In Bangka Belitung Province, the industry has created about 300,000 jobs, said Johan Murod, a director at PT Bangka Belitung Timah Sejahtera, a group of six smelters.

The market is “critically dependent” on exports from Indonesia, Peru and Bolivia, said Edward Meir, a senior analyst at MF Global Holdings Ltd. in Darien, Connecticut. Output from the two South American nations may drop to a combined 48,000 tons this year from 51,100 in 2010, CRU estimates. Indonesian supply may increase “slightly,” ITRI forecasts.

The average metal content of ore is declining because richer deposits are now exhausted, Mohd. Ajib Anuar, group chief executive officer of Malaysia Smelting Corp., the country’s biggest producer, said in an interview in January. Mining companies are removing twice as much waste as they did two decades ago to get to the ore, he said.

Trawling Offshore

PT Timah will report net income of 1.47 trillion rupiah ($172 million) this year, compared with 948 billion rupiah in 2010, the mean of 10 analyst estimates shows. The shares have climbed 20 percent in the past year in Jakarta.

A rally would also help the miners of Bangka Island, including Erfandi, who used just one name, and Andri Salim. He used to dig up ore from his backyard and now supervises 10 workers trawling for the metal offshore.

“People are buying new cars, motorcycles and sending their children to good schools all because of tin,” the 47 year-old Salim said. “We can see tall buildings, hotels, three shopping malls and lots of stores.”

To contact the reporters on this story: Glenys Sim in Singapore

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