LONDON — Tentative movement was reported Tuesday toward settlement of a crisis that has halted global trading in tin for seven weeks. Major producer and consumer nations were said to be nearing agreement on a formula that would allow tin markets to reopen.
Sources close to the International Tin Council (ITC) expressed cautious optimism that members of the council were nearing agreement on the make-up of a six-member committee that would be asked to work out the strategy. It would include three ITC members and three representatives of the major creditor banks and metals brokers.
Global trading was suspended Oct. 24 after the ITC announced that it had exhausted the fund it used to support a minimum price. The big tin markets in London and Kuala Lumpur, Malaysia, closed. The price at that time, just over 8,100 pounds sterling (about $11,900) per ton, had been fixed by treaty among 22 of the world's main producer and consumer countries.
The ITC, once regarded as one of the most successful commodity cartels, had run up debts to bankers and metals brokers in its effort to defend the minimum price by buying tin for its stockpile.
Wrangling among ITC countries over the responsibility for these debts, which are estimated at up to $500 million, has blocked resumption of trading and created uncertainty on the London Metals Exchange. This in turn has depressed other metals markets.
According to sources close to the deliberations, the committee's proposed settlement to the ITC would include a schedule for repaying creditors and a recommended price to take effect with the resumption of trading. According to these sources, it is still not clear whether the committee's recommendation would be binding or would be negotiated further by all the members.
It had been thought that Southeast Asian producer countries--Malaysia and Indonesia, for instance--were the principal stumbling blocks to resolution of the crisis. When trading was suspended, some of these countries had still to honor commitments totaling $90 million to buy tin for the stockpile, and it appeared that they were either unwilling or unable to meet their share of ITC liabilities accumulated as a result of the crisis.
But it appears now that West European countries, notably France and West Germany, have put up the most resistance. Sources who have followed the deliberations said that both these countries have refused to commit themselves in principle to making up part of the losses until they know how much they must pay--a position described by a London trader as a chicken-and-egg argument, since losses cannot be quantified until the terms of a settlement are clear.
As several brokers see it, the European foot-dragging is not so much reluctance to pledge the necessary funds as part of an effort to discredit London as a world trading center.
"This is all much bigger than tin," said Stephen Briggs, a broker with the American Express subsidiary Shearson Lehman Bros. "The Europeans see this as a chance to knock London as a financial center."
In what was widely interpreted as a challenge directed more at the London bullion market than at the ailing London Metals Exchange, three Swiss banks last week in Zurich opened a market in silver.
At a Nov. 27 news conference, Swiss Bank Corp, Union Bank of Switzerland and Credit Suisse described their plan to fix a daily silver price as an attempt to wrest business from the London market.
Although the banks say the project is successful, London brokers say it has had little impact.