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Fading demand forces PP, PE sellers to step back in Turkey

by Merve Madakbaşı - mmadakbasi@chemorbis.com
  • 19/03/2021 (09:03)
Turkey’s import and local polyolefin markets have been facing growing pressure from waning buying appetite since last week. The majority of PP and PE consumers went to the sidelines after paying massive increases in February and early March to replenish their stocks.

Several reasons as below have cushioned activity and caused sellers to trim their offers:

•   Materials on the way provided relief for buyers
•   Buyers wrapped up their purchases in early March
•   Resistance to astronomic hikes grew as panic faded
•   Converters in the southern region cut running rates

Polyolefin demand ground to a halt ahead of April pricings

Unprecedented price hikes prompted buyers particularly in South Turkey to reduce their running rates starting from February. Many PP converters said, “It is not logical to convert raw material at inflated prices when a buyer fails to pass any of these hikes through end-users. We try to avoid making losses.” Moreover, the prolonged shortage of containers prevented manufacturers from shipping their goods and caused a build-up at factories.

The run-up faltered in H1 March while more players reported hearing corrections for PP and PE in recent days. Prices on the high ends of the overall ranges were trimmed in particular both in the local and import markets as sellers tried to entice better buying interest.

“Some sellers triggered panic sales to boost buying interest and decided to scale back their margins. This is because supply tightness has found some relief when compared to the previous weeks,” a participant said.

Export volumes from China weighed on PPH

An arbitrage window from Asia to Turkey paved the way for an increased number of Chinese homo-PP offers since last month. “Around 30,000 tons of PP have been sold in total as these cargos provided a more competitive edge against prices for limited volumes of Middle Eastern and European cargos,” claimed a player.

“Some buyers seem to be covered until June as their cargos from January and February are also about to arrive. Thus, demand thinned down visibly for distant cargos. Meanwhile, the shippings for some Chinese cargos will start on March 25-26 for arrival in early May,” said participants.

Turkey- Local Prices – PP Raffia – LDPE ­– LLDPE – HDPE

Local markets saw corrections, PP raffia and LLDPE take the lead

The downward corrections were pioneered by PP in early March as demand support gradually faded and supply relatively eased. As can be seen from ChemOrbis Market Snapshot above, the locally-held raffia market retreated $255/ton in the last two weeks. The market had skyrocketed by $990/ton in total during the chaos back in February.

As for PE, LLDPE C4 film saw the most significant corrections this month as it posted steeper hikes than HDPE film during February. Prices have lost $90/ton so far in March after spiking $555/ton. HDPE film offers softened $35/ton on an average following a cumulative gain of $415/ton before the market cooled off.

In the meantime, the correction for LDPE has been limited to $25/ton despite a massive hike of $690/ton through February. “This is mainly because the product has just reacted to slowing demand. Film grade has eased in terms of supply, while general-purpose remains tight,” multiple players explained.

What lies ahead for Turkish players?

Both buyers and sellers concur that import PP prices head for healthy corrections in April. Yet, limited volumes and ongoing logistic mishaps are expected to prevent the market from experiencing sharp price cuts. “Middle Eastern sellers will probably keep their discounts modest given limited volumes and better netbacks in Europe,” argued a large trader. The extent of corrections will also depend on whether or not the flow of Chinese materials will continue to exert pressure on other sellers, not to mention an unpromising demand outlook.

Early expectations for PE appear mixed for the time being, meanwhile. No further price hikes are foreseen for import offers considering an all-time high premium over China markets as well as cautious demand from consumers. “The market needs to get rid of its bubble. Middle Eastern sellers may attempt for small hikes to obtain rollovers on deals to hold the market. If demand remains subdued, we may see downward corrections later in April,” noted players.

Players will also look into global dynamics. The European markets are drawing a strong picture for another month amid supportive supply-demand dynamics as well as costs, while increases lost steam in China and Southeast Asia this week. Additionally, the storm-hit production in US petrochemical plants has started to resume slowly which may provide further relief for global supply in the medium term.
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