* Malaysia Smelting Corp is world's third largest tin
* There is a backlog of tin ore to be smelted -MSC
LONDON, April 30 (Reuters) - Malaysia Smelting Corp (MSC),
the world's third largest tin producer, has told clients its
smelting operation is being severely affected by the COVID-19
pandemic and it will take nine months to resume normal output, a
letter seen by Reuters showed.
MSC said in the letter, dated April 26, that it had to
restrict intake and make changes to contracts - a move that will
further exacerbate shortages of tin used in solder for
electronic products and chemicals.
Shortages started to emerge early this year as accelerating
industrial activity boosted demand for tin and supplies remained
under pressure from COVID restrictions.
"We are no longer able to handle our usual volume of feed
materials until we have re-established pre-pandemic smelting
capacity," the letter stated.
Benchmark tin prices on Friday hit $29,225, a ten
year high, a gain of more than 40% so far this year.
MSC accounts for about 7% of global supplies
estimated at around 330,000 tonnes last year. It produced 22,400
tonnes last year, International Tin Association figures showed.
The company's website states it has capacity to produce up
to 60,000 tonnes of tin a year.
MSC's operations over the past year have been impaired
partly by restrictions on staffing numbers due to the
coronavirus and partly because of technical problems at its new
smelter, two sources with direct knowledge said.
"The pandemic led to disruptions in our smelting operations
and as a result, there (is a) backlog of tin ore to be smelted,"
MSC Group Chief Executive Patrick Yong told Reuters in response
to requests for comment.
"In addition, our aging reverbatory furnaces at the
Butterworth smelter have been in operations since 1902 and are
experiencing some downtime due to natural wear and tear.
Yong said MSC expects "to achieve full capacity at the new
Pulau Indah smelting plant by end 2021," and that the company
does not reveal production figures.
MSC processes its own mined tin raw materials and
concentrate for other companies sourcing material from countries
such as Nigeria and Democratic Republic of Congo.
The letter said customers that buy tin will now have to pay
a price determined by MSC, based on its "capacity and ability to
process the material," as opposed to the pricing terms in the
Another change for clients is an extension of the time taken
to process raw material into metal for other firms, known as
tolling, to 60 days from 30 days previously.
"MSC is sitting on hundreds of tonnes of concentrate
accumulated over the last year, concentrate it hasn't been able
to process," a source with direct knowledge of the matter said.
"Nobody has been getting much metal from (MSC). It's one of
many reasons why there are shortages in the tin market."
The scramble for tin can be seen in historically low stocks
<MSNSTX-TOTAL> in London Metal Exchange registered warehouses
and the premium for the LME cash over the three-month tin
contract, currently around $2,400 a tonne.
The premium climbed above $5,000 in the middle of February.
(Reporting by Pratima Desai; additional reporting by A.
Ananthalakshmi in Kuala Lumpur; editing by Veronica Brown and