Sources expected the MMTC urea tender of November 22 to close with prices in the $405-$415/mt CFR range. They were not too far off, the average price of all the firm offers was $416.52/mt CFR for the 1.6 million mt offered.
However, the lowest offer came from Swiss Singapore at $394.50/mt CFR for 50-60,000 mt and $399/mt CFR for 50-150,000 mt with an option of an additional 225,000 mt at the latter price. The next highest price came from Continental at $409.45/mt CFR and $412.45/mt CFR.
Sources reported that as soon as the tender closed, MMTC prepared its counter bids to all the offering companies to see if they would match the Swiss Singapore numbers. Past tender experiences have shown that a gap of $10/mt is often very hard to overcome. One trader noted before the tender closed, however, that there would most likely be a lot of people with extra tons on their hands that they need to move.
A major limitation on the ability of offering companies to lower their prices is the requirement that deliveries must be to West Coast ports. Sources were expecting to see Iran and the Black Sea dominate the offers. The extra steaming time from China adds costs that make lowering prices from China difficult and could eliminate tons from that country.
The only direct offer from an Arab producer came from Qafco at $400/mt FOB. With freight estimated at $18-$20/mt, sources said before the closing of the tender that if the offers came in around $415/mt CFR, there would be some room for Qafco to lower its price and earn an award from MMTC. With the low price at $390/mt CFR, the gap may now be too large to bridge.
India needs about 1 million mt to close out the year. If MMTC takes the full Swiss Singapore firm and optional tons, that would only get MMTC half way to its goal.
Talks are expected to continue into this week.