Tobacco bidding in Yunnan announced! Has potassium sulfate found a savior?

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Tobacco bidding in Yunnan announced! Has potassium sulfate found a savior? Author/Source: China Fertilizer Network Date: 2020-09-27 Clicks: 8 Starting in mid-August, the price of potassium sulfate began to decline; over the past month or so, prices in some areas have dropped by about 100 yuan (per ton, the same below). Currently, the market situation for potassium sulfate in Mannheim is not very favorable, mainly due to weak demand during the off-season. However, supported by low inventory levels, rising prices of potassium chloride, and fluctuations in acid values in certain areas, prices remain relatively stable for now ； The market situation for potassium sulfate in the water-salt sector is fairly good; limited production means there is no pressure on sales. Price increases began to occur even before prices in Mannheim dropped, and currently the price has risen to a level comparable to that in Mannheim. Overall, the problems in the potassium sulfate market stem mainly from Mannheim; the price of the water-salt mixture wants to rise further, but that is possible only if prices in Mannheim rebound. 　　Amidst the continuously rising bid prices for potassium chloride, the prices of potassium sulfate in the Mannheim region have seen a slight rebound at the lower end; however, overall sales are not satisfactory, so low prices are likely to appear from time to time in order to alleviate sales pressure. In other words, the current rise in the price of potassium chloride alone is not enough to fuel this situation. At this time, the annual largest tender for potassium sulfate for tobacco use in Yunnan was finally announced. Will it be a savior for the potassium sulfate market? 　　On September 23, the Yunnan Province Branch of China National Tobacco Corporation issued a tender announcement for the procurement of potassium sulfate for tobacco use across the province for the year 2021: the required quantity is 179,585 tons (compared to 180,000 tons in the previous year, which is roughly the same) ； Bidders are required to have an annual production capacity of no less than 60,000 tons (this figure was 80,000 tons in the previous year, indicating that the requirement has been reduced, which in turn expands the range of bidders who can participate) ； Joint bids are not accepted ； It is divided into six lots in total; the first five lots each have a capacity of 30,000 tons, while the sixth lot has a capacity of 29,585 tons. In the previous year, it was divided into four lots with capacities of 72,000 tons, 54,000 tons, 36,000 tons, and 18,000 tons respectively. Bidders can submit bids for lots 1 to 4 based on their own circumstances, but they are allowed to win bids for at most two of these lots ； In this tender, bidders may submit bids for multiple lots and win several of them, but the total estimated volume of the lots for which they are recommended as the top winning candidates cannot exceed 50% of the winner’s annual production capacity. While this approach seems to allow those who are most capable to work more, in practice only Luo Potash is able to win multiple lots ； The bid threshold is 2,600 yuan (2,950 yuan in the previous year) ； The delivery location is delivery on the railway platform designated by the tenderer ； The delivery date for materials to be used as production inputs shall be no later than January 31, 2021, while the delivery date for those to be used as single-use fertilizers shall be no later than March 20, 2021 ； The bid opening time is 09:00 on Tuesday, October 13, 2020. 　　Additionally, the bidding requirements for water-soluble potassium sulfate are as follows: joint bids are not accepted, but there is no restriction on whether the bidder is a manufacturing enterprise or a distributor ； The purchase quantity is approximately 3,898.625 tons (the figure for the previous year was 3,494.415 tons, showing a slight increase) ； The bid threshold is 2,900 yuan (3,499 yuan in the previous year) ； The delivery location is the tobacco leaf stations designated by the Used Tobacco Company. 　　Currently, in regions where the prices and shipping costs in Yunnan are relatively reasonable, the factory price of 50% potassium sulfate powder in Mannheim is around 2500 yuan, while the factory price of the 52% fully water-soluble powder is around 2600–2700 yuan ； For the water-salt system, the unified price at the station for 52% powder is around 2450 yuan, while the unified price at the station for 50% powder is around 2300–2350 yuan. It is understood that the shipping cost plus the financial fees associated with payment after delivery amount to at least 300–400 yuan. It is evident that this tender for tobacco in Yunnan favors the potassium sulfate-based water-salt system, as it is both profitable and helps to alleviate sales pressures ； The manufacturers in Mannheim feel somewhat strangled. 　　It is expected that this bidding process will be successful on the first attempt and there will be no failure to win the bid, although many manufacturers have currently indicated a lack of strong interest in winning it. There are 6 bidding segments, and it is estimated that Mannheim Potassium Sulfate can win at most 2 of them, thereby helping to alleviate the sales pressure faced by large companies during the off-season ； Once the contract for the water-salt system is secured, the supply of raw materials will become more scarce, which will facilitate their price increase plans. Overall, although Yunnan Tobacco’s bidding process cannot be considered a savior for the potassium sulfate market, it is undoubtedly a positive development that helps to stabilize prices during the off-season and lays the groundwork for a possible rebound in future times. At least for the companies that win the bids, it’s equivalent to purchasing insurance. 　　(Adu)