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Focus turns to August in Turkey: PP and PE players sidelined amid blurry outlook

by Merve Madakbaşı -
  • 17/07/2020 (04:42)
Polyolefin players witnessed a bull market for the second straight month in July as improved activity and rising upstream exerted an upward pressure on prices. The firming trend in other markets including Asia and Europe coupled with reduced supply contributed to the new series of gains on transactions although sizes of increases varied depending on product.

Middle Eastern offers soared 20-24% since May

The re-opening of global economies in stages buoyed polymer consumption starting from late spring and prompted Middle Eastern suppliers to divert their cargos to different regions. This led to intense supply woes in Turkey particularly for LDPE and HDPE pipe 100. A lack of quotas from US, Korean and European suppliers boosted sentiment further for almost all products.

According to ChemOrbis Origin Based Indexes, Middle Eastern origins recorded cumulative increases of around 24% for PP raffia and 21% for fibre in total from early May when prices bottomed out. PE prices posted cumulative increases of 20-22% in the same timeframe, suggested the weekly average data.

PE fared visibly better than PP in July

In the recent couple of weeks, an increasing number of Turkish players reported waning demand across polyolefin markets. This was interpreted as a result of intense restocking activity back in late June and early July.

Apparently, PP hikes were capped by slower demand. A converter marked, “We are covered for August now. The high ends of price ranges met with resistance which kept cost-driven increases in check for dutiable origins. Similarly, European PP sellers were unable to reflect the entire propylene increase to their deals amid higher €/USD parity.”

“Most manufacturers replenished their stocks during the price rally. Some of them were engaged in bulky volumes based on the relative recovery in industries and tight supply for certain products given healthy demand from China ,” a global trader reported to ChemOrbis.

As can be seen from the ChemOrbis Graph above, the premium of Turkey’s import PPH market over China narrowed from as high as $96/ton in late June to $65/ton in mid-July. However, Turkey’s PE market is carrying a premium of $45-55/ton over China as per this week’s average data.

The PE market received extra support from short HDPE pipe 100 availability from Middle Eastern and Asian sellers, which also boosted HDPE film. Plus, inadequate stocks at Turkish Petkim, Saudi and European suppliers pushed LDPE up.

ChemOrbis data revealed that PP raffia and fibre prices have gained around 2.5% ($25/ton) when compared to the end of June. Looking at the total PE gains in H1 July, however, LDPE was up by $47/ton (4.7%), while LLDPE rose $34/ton (3.7%). HDPE film soared 5.7% or $52/ton on a weekly average.

Among PE products, LLDPE posted the smallest gains since the arriving materials loosened supply and activity was slower compared to others.

What lies ahead for August and September?

Players started to voice their early August expectations with a few of them predicting to see a stable to slightly firmer trend.

“The prevailing price levels in China are supported by active demand, supply limitations and high costs. This may lead to additional hike attempts for PE albeit in small sizes next month if oil futures hold at $40/bbl,” traders said. For PP, suppliers confirm slower demand and players see rollovers more likely to pass on deals.

Players need to monitor not only the upstream chain but also the impact of the approaching Eid Holiday in Muslim countries and summer vacations in Europe in the coming days.

In the meantime, September draws a foggy picture due to uncertainties related to the second wave of COVID-19 cases and its impact on consumption as well as economies. Turkish buyers believe that the PP and PE markets may shift direction after August in case demand does not pick up and China’s import markets level off at some point.

“Although it is early to talk about autumn, September may be a critical month for polyolefins. The upside may lose steam in August and prices turn soft afterwards particularly if supply finds a relief across the board,” participants opined.
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