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PE rally loses momentum on subsiding demand in Türkiye

by Merve Madakbaşı - mmadakbasi@chemorbis.com
  • 16/02/2024 (02:37)
Polyethylene prices have been on a bullish note since late December last year due to severe supply chain disruptions across the board. Import prices have reached their highest levels in a year as longer transit times and soaring shipping costs stemming from the Red Sea crisis triggered a series of notable hikes. Needless to say, panic buying coupled with low prompt stocks played a key role in the bull run.

Middle Eastern PE prices hit highest levels since March 2023

The weekly average data from ChemOrbis Price Index reveals that import Middle Eastern PE prices have risen to their highest levels in almost a year in February. The cumulative increases have reached $125-165/ton (12-17%) since the uptrend kicked off in late December.

Middle Eastern PE prices were assessed mostly steady from last week at $1150-1180/ton for LDPE and $1120-1150/ton for LLDPE C4 film, HDPE film CIF Türkiye, subject to 6.5% customs duty, cash.

The resistance from buyers has become prominent in recent days, which caused some traders to trim their earlier hike targets for the month. A manufacturer said, “We realized slight step backs from our suppliers in tandem with the fading panic buying.” The rumor has it that some HDPE film cargos at $1100/ton CIF were available, while this was not confirmed by primary sources at the time of writing. Similarly, a trader reported hearing prices at around $1070/ton for US LLDPE despite sell ides at around $1100/ton CIF.

CIF Türkiye – LDPE– LLDPE – HDPE – Import Prices

Demand ebbs compared to previous weeks

A converter said, “We have not been able to pass through our steely rising PE costs to our end customers. End-product demand has failed to catch up. Now that everyone has secured their needs and will wait for their materials to arrive following delays, PE buying interest may remain muted and the bullish trend may falter next month.”

Some players also pointed to the upcoming local elections and the holy month of Ramadan as other factors that may weigh on the market and offset any supply concerns going forward. According to some players, PE has not been as tight as PP thanks to some volumes for Iranian and US origins. One of them said, “Despite reduced availability from the Middle East and a lack of much Russian cargos, the market has seen some relief for HDPE owing to the arrivals of Iranian materials.”

Local PE sees a respite from relentless increases

The delayed arrival of import volumes rubbed off on the local channel and spurred active buying interest for prompt cargos at warehouses in early Q1. The local PE markets have surged by 11-15% ($150-220/ton) since the uptrend gained momentum.

The largest gain occurred for LDPE driven by successive increases from the domestic producer, Petkim, and robust demand. A trader said, “CIF prices failed to grab much interest as extra costs stemming from the abolishment of VAT discount right prompted LDPE buyers to prefer the local market to meet their urgent needs, not to mention longer journeys of import cargos.” Any LDPE prices at/above the $1200/ton CIF faced a lack of buying interest unless they were given for prompt or nearing cargos, as multiple players put it.

Early March expectations offer a mixed bag

Players started to reevaluate their previous projections for additional PE hikes next month. “Prices may stabilize if activity stays lull, let alone the potential impact of Ramadan and elections on the market. If resistance mounts on the side of converters, supply issues may slip into the background regardless of the ongoing unrest in the Red Sea,” a trader commented. Although they remain well above pre-crisis levels, freight rates for certain routes have seen downward corrections.

Meanwhile, some others point to the lingering disruptions in the Red Sea, saying that supply may not loosen before April and PE may retain its strength over the near term. Meanwhile, players will monitor the post-CNY scene in Asia in the coming term now that netbacks improved in Türkiye.

Right before the Lunar New Year break, import Middle Eastern LDPE prices traded $115/ton above China, while LLDPE and HDPE film carried around $180/ton premium over this market. These pointed to the largest gap with China since March 2023.
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