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Competitive European PP, PE cargos put further pressure on Turkey

by Merve Madakbaşı -
  • 08/07/2022 (03:26)
Turkey’s import polyolefin markets have been under a heavy strain from lethargic resin demand during the last few months. This was because record-high inflation coupled with tight liquidity and disappointing seasonal factors kept prices on a bearish note. Moreover, competitively-priced European cargos put an added strain on offers.

Regional suppliers focus on exports to ease pressure

Europe’s spot polyolefin markets have been mostly eroding since May as the highest inflation rates in a few decades have taken their toll on consumption. The bearish trend gained momentum in June amid improving import supplies and a global downtrend.

Meanwhile, PP prices saw sharper declines as compared to PE as demand for PP applications slowed more visibly than downstream markets for PE. Although June olefin contracts were stable or saw only minor changes, the downward spiral continued in downstream markets.

The scene has been added to by the notably lower ethylene and propylene settlements for July. The approaching summer holidays, combined with persistently slow activity and rising utility costs, prompted European producers to increase their exports to neighboring Turkey. "Sellers aim to ease their stock pressure considering the approaching summer holidays within the block," players concurred.

Export volumes from Europe have increased despite the unfavorable netbacks in Turkey. The weekly average data from ChemOrbis suggests that the spot PP and PE markets of Europe continue to carry a premium over Turkey, although the gap has narrowed as compared to the previous highs.

CIF Turkey – Import Prices – PP Fibre – LDPE

European PP, LDPE weigh on regular sellers

The pressure from aggressive European offers has been felt in the LDPE and PPH markets the most. Competitive prices exerted further pressure on Middle Eastern producers and led to noteworthy losses in the market.

European LDPE offers for July have emerged, with monthly decreases of more than €100/ton at €1520-1570/ton ($1550-1601/ton with recent parity) CIF Turkey, cash no duty. The dollar equivalent of the range stood $50-70/ton below the dutiable Middle Eastern offers.

Similarly, European homo-PP fibre and injection prices formed the low end of the overall market. In comparison to June, prices were lower at €1280-1300/ton ($1303-1324/ton) CIF Turkey, with no duty. They were at least $80/ton below the offers from regular suppliers. Similarly, PPBC injection prices at €1350-1400/ton ($1377-1426/ton) traded around $100/ton below Saudi cargos and provided a competitive edge on the low end of the market.

"An increased number of offers from Europe proves the ongoing lethargy in the region’s downstream markets. Indeed, most European consumers shifted their attention to services rather than goods, "noted players.

Two-decade low €/USD parity reinforces pressure

The USD has been strengthening against other currencies in the midst of the Fed’s interest hikes and lower crude oil futures. Recently, the €/USD parity has shrunk to around 1,02, the lowest in 20 years. This exacerbated the competitive power of euro-based offers in Turkey.
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