Egypt's GASC sets new wheat terms after dispute over fees

Reuters

By Eric Knecht and Maha El Dahan

CAIRO/DUBAIFeb 2 (Reuters) - Egypt, the world's largest wheat buyer, has set new tender terms intended to calm wary suppliers, some of which shunned recent state tenders after a surge in costs faced by suppliers if they fail to unload their ships on time, traders said on Friday.

Suppliers have complained in recent months of a spike in these demurrage fees. They say the higher fees resulted from congestion at Egypt's ports since last summer and what they describe as a tedious inspection process that has stalled their vessels.

Egypt's lengthy and often erratic inspection procedures have been at the centre of a row over import requirements in recent years, according to traders, with a spate of cargoes rejected and suppliers often hiking offer prices or shunning tenders in response.

A standoff over the demurrage payments led suppliers to briefly withhold offers and nearly halt a tender last month.

In an apparent bid to smooth trade, GASC on Friday

set a cap on demurrage fees. Suppliers are now responsible for only the first 12 days of demurrage at a cost of $12,000 per day. Suppliers had previously been responsible for any duration and all demurrage fees accrued.

GASC also hiked sieving fees to $3 per tonne from $2 per tonne previously.

Traders said the new fixed-rate system would better allow them to calculate their costs and therefore reduce risk, though it would likely drive up offer prices.

Traders said the new terms were reflected in higher offer prices in Friday's tender, with the lowest offer free-on-board at $202.70 per tonne for Russian wheat, compared to $197 two weeks earlier.

GASC on Friday also reduced protein requirements for major origins, a move that is generally intended to lower prices by allowing for lower quality wheat to be imported.

The minimum protein requirement for GASC's top-origin Russian wheat as well as Romanian and Ukrainian wheat was reduced to 11.5 percent from 12 percent, a tender document seen by Reuters showed.

The minimum protein level for French wheat meanwhile was decreased to 11 percent from 11.5 percent; U.S. soft wheat was reduced to 11 percent from 11.5; and U.S. hard wheat was lowered to 12 percent from 12.5 percent.

"Lowering the protein requirement is, in my opinion, a sort of compensation for the stricter rules regarding sieving and demurrage. But protein is not a problem this year. It's not hard to find," said one European trader.

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