New risk in the market of agricultural water pipes

According to INPIA, quoting the world of economy, while the main products made of this material, namely polyethylene pipes, are associated with a bidding mechanism, which due to delays in forecasting bids with the time of its implementation, the possibility of equalizing prices with the daily rate. This product does not exist, so it has seriously damaged the production and export process of these products. In this regard, “World of Economy” has interviewed Seyed Saeed Zamanzadeh, market expert and member of the board of the National Association of Polymer Industries of Iran. Inability of the producer to cover the risk of rising prices At the beginning of the conversation, Seyed Saeed Zamanzadeh explained the general situation in this market: The main buyer of pipes made of polyethylene raw materials is the public sector, such as water and sewage companies, gas companies or Jihad-e-Keshavarzi. The purchase of these pipes is through tenders that are held. In fact, these companies make price estimates for tenders based on the construction or current budgets allocated to them by the government. The main challenge we face is that the estimate made, although based on the current market price, will no longer be effective due to the time intervals that occur at different stages of the bidding because we are in a situation where stock market raw materials are leveraged. The week is getting more expensive. Based on this, the estimate that is made several weeks before the tender, although correct, will definitely be lower than the prices at the time of the tender. Obviously, this has a direct effect on construction projects and complicates the export of polyethylene pipes, the most obvious of which is the reduction of the competitiveness of our products with other countries that produce these pipes. He stressed that the weekly rise in the price of the Nimai currency is a fundamental problem in commodity markets, especially the polyethylene market, which causes instability in market transactions, especially for this product, which is associated with special trading conditions. In products that are traded up to date, it is easy to apply the conditions and increase the price of the final product as the price of raw materials increases, but in the case of polyethylene, this mechanism does not exist and the seller or manufacturer sells his product during the bidding process. It is called, it sells. It takes one month from the time the tender documents are sent and the tender is held. One month in the commodity exchange trading literature means 4 weeks of stock exchange trading. The time required for contracts is usually 3 months and a total of about 4 months, which is 16 weeks, while the upward trend in prices has been maintained throughout this period and the price of raw materials has experienced a significant increase. He referred to the meeting of the National Polymer Association and its affiliates on Tuesday and said: “The focus of this meeting was the upward trend of the exchange rate, which was announced two weeks later this week and shocked the basic prices of raw materials to the point of increasing.” We were 10% and above for many products. As mentioned, we can not have instant sales, especially units that are contracted by state-owned companies. The board member of the National Association of Polymer Industries of Iran added: “We agree with any transparency and prevention of rents, but this platform must be two-sided, there can be no two different views in relation to upstream and downstream industries; While there is considerable employment in downstream industries, most of them are closing down in the current situation. Increase the attractiveness of credit shopping The market expert pointed to the demand for polyethylene and said: “The volume of demand in the market does not simply mean the market needs.” This demand is based on the manufacturer’s forecast of a price increase next week, which, to cover its risk, prefers today’s purchase to tomorrow. Here we are talking only about the producer and we have nothing to do with middlemen and speculators. Credit offering means buying by opening a letter of credit with the bank. Credit offers made on Wednesday last week were priced at 300 tomans per kilogram, while cash offers entered the match. The main reason that the incentive to buy and demand for credit increased was that the bank received a 2% commission on the letter of credit, which is insignificant compared to the 10 to 15% increase in the future price of raw materials on the commodity exchange. The real producer prefers to buy credit so that he does not have to worry about rising raw material prices for his future products.