IPL and TCP call urea tenders – Alert
Two major players in the fertilizer world called urea tenders today.
Indian Potash Ltd. called a tender for an undetermined amount to close May 9. The Trading Corp. of Pakistan called a tender for 50,000 mt to close May 29.
The two tenders come as Chinese and Arab urea producers are calling for higher prices to stop the slide in prices that has taken place in the past several months.
Of the two tenders, industry watchers will be paying close attention to IPL.
The Indian buyer will have to make a large purchase to make up for the smaller quantity taken by STC in its recent tender.
The STC awards of about 500,000 mt are facing even greater problems. Of that amount, 180,000 mt were to come from MTPL with Chinese product. The refusal of Chinese producers to accept the $266/mt CFR price now puts the delivery of those tons in jeopardy.
The remaining tons are all expected to come from Iran.
Trading houses will be looking at the payment rules in the IPL tender documents closely. Industry sources said the low participation rate in the STC tender was a direct result of STC saying it would not make payment until the Department of Fertilizers inspected the product and authorized release of the funds. Traders complained this broke with years of using letters of credit for payment.
Offers in the IPL tender must remain valid until May 16 with shipment by June 29.
India’s neighbor, Pakistan, stepped in with a smaller tender, but one that is expected to be repeated.
The TCP tender closes May 29 with delivery no later than June 23. Offer validity is for only 24 hours, leading to speculation that more tenders will be called in the next few days.
The Pakistan government authorized the importation of 310,000 mt late last month. This tender may represent the first in a rapid series of tenders to reach that amount.
The rules governing TCP tenders do not allow the buyer to negotiate with the second or third lowest offering companies, as Indian buyers are allowed. The buyer can only take the offered tonnage from the lowest qualified offer. If that offer does not fulfill the needs of the tender, TCP is forced to call another tender for the balance.
This created a situation where a number of tenders had to be called in rapid succession because few companies were willing to offer 300,000 mt in one shot.
Also under TCP rules – unless the government issues a special exemption – the time between calling the tender and its closing is 30 days. When TCP was forced to call follow-up tenders, it either had to ask for an exemption to reduce the time from announcement to closing or stretch out the purchasing schedule for months.
Recently, however, TCP has taken to calling tenders for smaller amounts of 50-60,000 mt one day after another. For example, the current tender closes May 29. If TCP follows its recent patterns, another tender will be called April 30 with a closing of May 30, April 31 to close June 1 and so on until the full 310,000 mt is covered.
One saving note for the Pakistani treasury is that unlike past tenders, the basic tender documents do not exclude Iranian material. Shipping for Iranian product is easier than for any other source and the material is often sold at a discount because of the complications of the embargo on Iran.