Indonesia bourse plans to launch tin futures next year

Reuters

* ICDX hopes to launch tin futures in 2014

* Follows controversial physical tin contract

* Indonesia wants greater influence on tin prices

By Michael Taylor

JAKARTA, Nov 21 (Reuters) - Indonesia's main commoditiesexchange is planning to build on its physical tin contract byoffering tin futures next year that it hopes could help wintrade from the London Metal Exchange.

Indonesia in August forced all its tin ingot exporters totrade on the Indonesia Commodity and Derivatives Exchange(ICDX), before shipping the solder material, in a bid to raiseprices and curb illegal mining, as well as to gain a greater sayover global prices now dominated by the LME.

Since the new regulation was introduced, shipments haveplummeted from the world's top exporter of the refined metal,with half the smelters in top tin-producing region BangkaBelitung halting operations and state-owned PT Timah declaring force majeure.

Undeterred by industry criticism, the ICDX businessdevelopment team is now conducting extensive studies on a tinfutures contract, with concrete plans due to be announced by thefirst quarter of next year with an eye on a 2014 launch, thebourse's chief told Reuters.

"It definitely has to be next year," ICDX Chief ExecutiveOfficer Megain Widjaja said of the tin futures plans. "There isa need to create a hedging mechanism built on the tin contract -it is something that we need to take a look at. Hopefully we canannounce our strategic move in the first quarter."

Several top tier LME members, including JPMorgan Chase, have started to look at whether to join the Indonesianbourse, sources said last week, in a sign the physical contractwas picking up momentum.

ICDX currently has 14 registered tin buyers and 17 tinseller members, Widjaja said.

As of Wednesday, around 700 lots of tin had traded on theexchange, eqivalent to 3500 tonnes, up around 6 percent from thefull month of October.

This is still a fraction of the LME tin contract where185,821 lots traded last month, equivalent to 929,105 tonnes.

"They've got to get the funds and consumers on board ... Idon't think that is likely," a London trader said.

Southeast Asia's biggest economy has shown no signs ofwatering down the trading rule, contrary to some marketexpectations, as it has done with other regulations such as itstin purity law.

The Indonesian government is focusing on making the new tincontracts work before looking at rolling out similar domestictrading regulations for other commodities, Widjaja added.

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