PE sentiment responds to firmer PP as July approaches in Turkey

Import PP prices continued to see upward corrections this week in Turkey. Suppliers eased their stock pressure earlier in June when prices bottomed out following a collapse in the market. Although PE was unfazed by PP’s recovery in the beginning, more players have started to agree that PE prices may generally move sideways in the coming term.



PP gains remained intact for the 2nd successive week

PP prices continued to move upwards this week, supported by an easing of the supply pressure on the sellers’ side. Nonetheless, most corrections were in modest amounts as many buyers had already replenished some stocks in the previous two weeks. Relatively calm demand capped the upside for PP raffia in particular, although sellers pushed for higher offers.

“Although a string of religious and national holidays may keep increases in check, we expect PP prices to retain their firming mainly supported by the closure of arbitrage window from Asia. Indeed, prices may post more solid hikes in the aftermath of holidays,” commented some players.

Upside may be limited by holidays next month

The PP market may continue to be corrected upwards in the coming term, as sellers will probably try to lift the market higher amid a lack of supply pressure. Some producers have already stated their intention to raise prices further. This scenario is supported by the recent stabilization of China’s import market, as well as the fact that inflated freight has resulted in a visible reduction in Asian cargos to Turkey.

According to ChemOrbis weekly average data, Turkey’s import PP raffia market carries a $210/ton premium over CIF China PP raffia and injection offers. This is compared to around $500/ton back in April this year, when Turkey faced an influx of Chinese cargos.

Buyers also agreed on the firm situation for PP regarding the coming term, whereas they believe that the market does not call for extreme increases next month.

"Producers are eager to lift the market further, which is reasonable considering the sharp drops back in May. Yet, a gradual rise seems healthier for the market considering the approaching holidays coupled with mediocre end demand for certain applications," argued a Turkish manufacturer.

Players: LLDPE and HDPE have mostly reached the bottom

The recovery in the PP market has prompted a cautious response from the PE market. Despite the fact that the upcoming religious and national holidays in July cloud the outlook, more players believe that prices have almost reached a bottom.

Moreover, the local producer, Petkim, has started to follow a stable to slightly firmer policy in some cases. Some players attributed this to the fact the stock pressure has eased on the producer’s side, while others interpreted this move as an attempt to end the bearish trend.

"LLDPE and HDPE markets may move sideways, while we believe that import LDPE prices may come down further unless demand visibly improves," noted some buyers.

Eyes on Middle Eastern announcements and China

Meanwhile, a few traders attempted upward LLDPE corrections, though no deals were confirmed at corrected levels at the time of publication. "We have eased stock pressure thanks to sales during the steep decreases in the first half of June," one of them noted.

Players will be focusing on fresh prices from the Middle East starting from next week. “Most sellers were sidelined this week amid a slightly recovered sentiment influenced by a rebound in PP offers. The market will be on edge ahead of July announcements from regular suppliers,” a converter said.

Virus-induced curfews will be lifted as of July 1 in Turkey, which may underpin activity to some extent in the coming weeks. Nonetheless, a slew of holidays will keep players on edge in the coming month. Although expectations diverge depending on the product, more players seem convinced that PE prices will move sideways in the short term.

This projection is supported by a closed arbitrage window from Asia, higher oil futures and a stable to slightly firmer scene in China. According to the weekly average data from ChemOrbis, Turkey’s import LDPE, HDPE and LLDPE markets are carrying respective premiums of $290/ton, $130/ton and $195/ton over import offers in China.

Still, players will need to track whether or not China’s import market will sustain its improved sentiment in the shade of sky-high shipping costs that are hammering the country’s exports and capacity additions.