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Bullish run loses steam in Turkey’s PP, PE markets

by Merve Madakbaşı -
  • 12/04/2019 (04:15)
Import PP prices have followed a bullish path since mid-January driven by dwindling supplies. PE started to follow suit by March while increases gained momentum in April due to reduced allocations from the Middle East.

End demand indifferent to seasonal expectations

Both PP and PE markets have recently stabilized at their multi-month highs, meanwhile, as activity relatively cooled off after converters replaced some inventories paying higher prices. Besides, end demand has failed to meet seasonal expectations so far as economic uncertainties and higher USD/TRY parity left the markets in the shade after political elections.

“We are preparing to participate in Domotex Fair in Gaziantep that will take place by late April, which may boost end product demand from export destinations,” carpet makers noted. Meanwhile, a PE packager commented, “Several shopping bag converters are running their factories at lower capacities which weigh on demand for HDPE film, in particular.”

Supply constraints still support PP, PE

Short PP availability was among primary triggers behind larger increases when compared to PE during the last two months. The absence of regular Saudi Arabian sources amid planned or unexpected production hiccups was offset by irregular American cargos to some extent.

“Supply issues at certain European sources also reinforced woes,” reminded a trader, referring to the outages at SABIC, Borealis and Braskem. A bcf converter affirmed this week, “Our South European supplier experienced some delivery delays for April.”

As for PE, Qapco’s LDPE shutdown resulted in reduced quotas from Qatar, along with a market talk that the producer’s LLDPE supply was also low. Buyers also reported that Saudi Arabian sources did not allocate significant quantities to Turkey this month, citing a lack of healthy margins.

Sentiment propped up by soaring crude, firmer China

Turkish players see a reversal in the sentiment unlikely over the near term based on the supportive upstream chain. Global benchmarks of NYMEX (WTI) and ICE Brent Europe hit their highest levels since November 2018, the weekly average data from ChemOrbis Price Wizard suggested.

A large trader highlighted, “The recent firming in China eliminated any possibility for a downturn in Turkey based on theoretical calculations. Although demand has not been spectacular with USD/TRY parity seeing above 5.70 this week, higher prices in global markets are likely to hold Turkey on the firm side.” On a side note, Ramadan may hamper trading starting from H2 May, according to buyers.

Strong crude oil and naphtha prices combined with limited import supplies encouraged sellers to adopt a firm stance on their PP and PE offers in China. “These factors counterbalanced the ample availability in the local market. Demand has improved following the VAT reduction while futures added to the atmosphere,” players in China marked.
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