The Trading Corporation of Pakistan (TCP) on June 22 closed its urea tender for 300,000 mt with prices lower than expected. The lowest offer came from Swiss Singapore at $317/mt CFR for 50,000 mt. There were two additional offers for a total of 125,000 mt below $320/mt CFR. In the run-up to the tender, industry sources were predicting offers in the mid-$320s/mt CFR.
Sources report that the tender was quickly awarded to Swiss Singapore. In general, the laws governing TCP purchases do not allow the buying house to negotiate with the other offering companies.
Because TCP was authorized to buy 300,000 mt in a “gallop” tender, the company will most likely call another tender for the remaining 250,000 mt. Under the general rules of operation, the tender will close at least one week after the announcement. The earliest TCP could close a tender is July 30.
In the last tender (GM June 10, pp. 7-8), TCP paid $337/mt CFR after a series of controversial moves that had the company first rejecting and then accepting the lowest offer of $335/mt CFR. In the end, however, the lowest priced offering company had already released its tons and declined the award.
The Swiss Singapore offer confirmed the thinking of many in the industry that there is a large overhang of Iranian product looking for a buyer. Swiss Singapore regularly handles Iranian urea product for export. Sources say there is about 500,000 mt in Iran with no home. This material and the nearly 2 million mt in the Chinese ports ready for export are expected to keep urea prices soft.
The next test of the market will be the IPL tender in India that closes July 26. If TCP calls another quick tender, it will not be able to close until a few days after the Indian deal is done. The Pakistan buying house could find itself paying higher rates for its next installment of urea.