The IPL tender closed July 26 with prices even lower than those offered in the STC tender just a month ago. And with more companies moving the price down.
Industry sources bemoaned the STC awarded prices of $303-$307/mt CFR last month as unrealistically too low. In the run up to the IPL tender traders were saying any offer below $310/mt CFR could cause financial ruin for any firm offering at those levels.
When the final IPL numbers came out, however, more than 4 million mt were offered below $310/mt CFR, compared to about 800,000 mt in the STC tender. Of the 27 companies offering material, only four had offers at $310/mt CFR and up. In the STC tender, only three companies offered sub-$310/mt CFR.
The lowest offer came from Overseas Trading at $303.50/mt CFR. The rest of the companies were well-known trading houses that don’t often make major mistakes in guessing market levels.
The low prices come on the heels of Arab Gulf producers pushing the price back into the $340s/mt FOB and prices firming in China around $315/mt FOB for granular and $300/mt FOB for prilled.
The offers are to remain valid until August 2.
Under normal rules, IPL will now go to the other offering companies to see if they will match the Overseas’ price. The other companies may respond the same way they did to STC last month. The offering companies could hold firm on their prices and negotiate only the quantities to sell.
One trader noted as the preliminary numbers came out, that few trading houses have enough profit margins to accept any price lower than their initial offer.