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Ebbing demand caps PP hikes in Turkey

by Merve Madakbaşı -
  • 25/03/2022 (09:34)
Players have been reporting muted demand since around mid-March, which has caused the rally to lose steam. The wild swings in upstream chains, and mediocre demand from end markets pushed consumers to the sidelines. This slowdown has come right after panic buying in early March, when rocketing oil rattled markets.

Import offers on the high ends lack buying interest

In the import market, Saudi Arabian PP raffia and fibre offers respectively reached $1680-1700/ton and $1730-1750/ton CIF Turkey, subject to 6.5% duty in mid-month. However, these levels have failed to work so far due to a slew of factors.

The main reason behind the growing resistance from consumers has been the bulky purchases made in the previous weeks, when 14-year high crude oil prices lured buyers to the market. Moreover, players concurred that end markets have not been brisk. “Demand for PE fared better than PP owing to support from the packaging industry,” they said.

A sack maker confirmed, "We paid incremental hikes earlier this month. We are covered for a while, and the end markets are not vivid. We opt to monitor the volatile upstream chain and how things will unfold amid inflationary pressures and war-related uncertainties."

“We expect sellers to retain their firm stance in the first half of April, counting on rising costs and freight rates. Nonetheless, we may see an easing in price levels later in case demand does not pick up moving into May,” another buyer commented. Meanwhile, whether or not Middle Eastern suppliers will turn to Europe due to juicy netbacks remains a question mark.

Turkey – Local PP Prices – Import – Homo PP – CFR Turkey – Ex-warehouse Turkey

Locally-held PPH markets edge down

Fading activity caused some distributors to be more flexible in their pricing following a three-month long uptrend. Indeed, sellers tried to boost their sales prior to the holy month of Ramadan, which led to small discounts. Overall, the local PP raffia range eroded by $40/ton on the low end to be assessed at $2080-2180/ton ex-warehouse Turkey inc. VAT when compared to last week.

A distributor said, “Any prices close to the $2100/ton inc VAT mark reflect weak buying interest looking at the current costs of import cargos. Distributors prefer to compromise on their margins to entice better buying interest.”

Sellers report mediocre demand for non-woven, in particular

Many suppliers pointed to the poor demand for PP non-woven. Traders said, "Price discussions have been thin for all PP grades recently. However, demand for PP non-woven has been the worst of all due to falling mask consumption." Indeed, a lack of demand for non-woven overshadowed supply constraints from the Middle East. The reduced purchasing power on the end users’ side weighed on resin consumption, while demand has reportedly fallen for wet towels and diapers.

Yet, costs continue to underpin markets

On the other hand, ChemOrbis data revealed that global oil benchmarks still hover around a-decade highs on a weekly average amid supply concerns and war-related uncertainties. April olefin contracts are projected to settle with sizable hikes in Europe as spot naphtha prices have again neared the $1000/ton threshold. Besides, spot ethylene and propylene prices in Asia were bolstered by low run rates and shutdowns at crackers.

Eyes to remain on PPH exports from China

Turkey’s import PP markets have been seeing Chinese offers in recent days although they have not been necessarily at aggressive levels. The emergence of these offers was the consequence of the eagerness of Chinese sellers to focus on their exports amid Covid-hit demand at home.

Chinese homo-PP raffia and fibre prices stood at $1610-1650/ton and $1700/ton, CIF Turkey, subject to 6.5% duty this week, respectively. These cargos formed a competitive edge as compared to Saudi origins, yet deals were sporadic. This is because their long lead times and break-bulk shipping terms were deemed risky by some buyers.

Turkey’s import PP raffia market currently trades around $470/ton above PPH offers on CFR China basis, according to the weekly average data from ChemOrbis. Nonetheless, elevated container fees have been posing obstacles to benefiting the arbitrage window in most cases.

In the coming term, some players believe that material flow from China, coupled with possibly competitive offers from Russia, may balance the market. "We expect Russian suppliers to turn to nearby Turkey to offset a lack of demand from Europe amid sanctions," said a player.

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