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Firm PP trend falters as subdued demand looms over Turkey

by Merve Madakbaşı -
  • 14/10/2022 (08:09)
Import PP prices hit the bottom in late August when output cuts stirred better buying interest from converters in Turkey. The market witnessed an upturn in September as elevated utility costs coupled with some turnarounds lent support to suppliers. Nonetheless, the firming trend has faltered recently due to unsupportive demand amid challenging financial dynamics and muted downstream markets.

Subsiding demand caps larger gains for PP raffia

Saudi Arabian PP raffia prices have gained $50/ton (around 5%) since the market reversed course last month. Sellers continued to justify their hike attempts with already low margins and their reduced allocations emanating from shutdowns in the Middle East at the beginning of October.

Yet, the markets have been increasingly pervaded by lethargic activity in downstream markets, which kept resin purchases tied to basic needs and price hikes in check.

Saudi Arabian PP raffia prices were assessed stable at $1070-1100/ton CIF Turkey, subject to 6,5% customs duty basis. Waning demand has capped additional hikes from sellers, not to mention the impact of a stable to a softer trend in the post-holiday period in China, as well as tumbling freight rates from the region.

CIF Turkey – Import Prices – PP Raffia – PP Fibre – PP injection

Fibre and non-woven prices soften on persistently poor derivatives

On the contrary to firm raffia prices, PP fibre offers have leveled off since last week following increases during September. This was because derivative demand, mainly from the carpet and textile industries, has not shown any signals of a recovery amid recession fears surrounding the global commodity and financial markets.

According to data published by the Southeast Anatolian Exporters Unions, Turkey’s September carpet exports receded by 9.3% from the same month of 2021 to $246.159 million.

Saudi Arabian PPH fibre was assessed $30-40/ton lower at $1100-1150/ton CIF Turkey, subject to 6.5% customs duty. Saudi PPH inj. was stable to $10/ton softer at $1120-1150/ton with the same terms. Saudi non-woven offers were reported as low as $1100/ton, meanwhile, in response to a severe stagnancy in derivative markets.

Non-woven markets witnessed a sharp demand contraction, with some converters shutting their lines amid poor order entry. Demand for food packaging applications also slowed down, mirroring the rampant inflation affecting consumers and businesses adversely.

Tumbling freight rates trigger lower bids for PPBC

As for copolymers, South Korean PPBC inj. and PPRC type 3 prices re-emerged at lower levels due to falling freight rates. A trader said, “We placed a lower bid to our Korean supplier, citing slumping logistic costs.”

Offers were assessed $50-60/ton lower for PPBC inj. at $1270-1300/ton CIF, cash and $60-90/ton lower for PPRC type 3 at $1350-1400/ton. Saudi Arabian PPBC prices failed to stage a rebound amid ample availability and sluggish demand. They were assessed stable to $10/ton lower at $1170-1200/ton CIF, subject to 6.5% customs duty.

Offline capacities in the Middle East hold the market, for now

PP prices will likely stay rangebound in the near term, supported by limited supply as turnarounds at some Saudi Arabian producers and the domestic producer, Petkim, continue for the time being.

Cash constraints, anemic demand, falling freight rates and the approaching year-end will continue to cash a shadow on the PP markets, on the other hand. Buyers are now sidelined to see which factor will come to the fore in determining the direction.

Some players expect prices to soften once operations will be resumed after planned turnarounds. China’s post-holiday recovery happened to be short-lived, considering falling futures amid crude’s plunge compared to the previous weeks and depreciating yuan. This along with demand woes in the nearby European market add to the weak expectations. A major market participant opined, “Global markets may crawl back to July-August levels during the rest of the year.”

According to the weekly average data from ChemOrbis, Middle Eastern PP prices in Turkey carry a premium of around $150/ton over the import levels in China. This delta would be deemed healthy nowadays, considering the current freight rates of around $100/ton from the Middle East to Turkey.

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