PLAST EURASIA 2022: Eyes on Russian and US supplies with demand woes in focus

Global plastics players gathered at the 31st edition of Plast Eurasia Istanbul, which started on November 23, 2022. The recession in Europe, muted derivative markets, the flow of US and Russian materials heading to the year’s end, and the cautious recovery in China’s import polymer markets have been the hot topics on the table so far.

Participants will try to obtain better clues amid a blurry outlook for the coming period during the event, which will end on November 26.

Turkey buckles under stalled demand, but what about costs?

During the first day of Plast Eurasia Istanbul, buyers and sellers had the chance to discuss the opposite factors that affect the PP and PE markets. Several players found common ground in the fact that lethargic derivative demand at home and in export markets continued to loom over Turkey’s polyolefin markets.

“We are planning to end the year with minimum stocks, considering our book closures. Thus, we are not interested in securing volumes,” multiple converters reported to ChemOrbis. Some others pointed to the recession in Europe as a reason for falling exports on the side of manufacturers, which have kept resin purchases hand-to-mouth since Q4 kicked off.

Still, players added that high utility costs may keep price erosion in check for certain PP and PE grades, not to mention supply cutbacks that aim to mitigate the impact of demand woes and might be extended into early 2023.

Participants discuss trade flow from the US and Russia

Steeply lower freight rates have been among the hot topics to discuss among participants as shipping costs continued to be dragged down by slowing trade across the board. Adding to the scene has been a lack of supply concerns, with subdued derivative demand amid inflationary pressures and fears about an influx from the US and Russia at center stage.

A source from a European polymer producer reported to ChemOrbis, "We heard that bulky US PE volumes are on their way to Europe for early Q1. This is not surprising given the region’s juicy netbacks, not to mention stockpiling on the side of US producers."

US PE producers have been destocking across export outlets, including Southeast Asia, Europe, and Turkey, since October, in the wake of the year-end lull and fresh capacities that have been launched since 2018. Recently, Shell has started up a huge complex that houses an ethylene cracker and downstream PE units, which has reinforced the pressure.

For more detailed production news on plant and producer basis, please visit ChemOrbis Production News Pro Tool.

Likewise, sanctions from Europe caused Russian suppliers to focus more on Turkey, particularly for PP. A source from a Middle Eastern producer commented, "Competitive offers amid ample supply from Russia weighed down on Saudi sellers through November. Nonetheless, if PPH prices in China manage to hold close to $900/ton CFR, import offers from Saudi Arabia may stabilize at around $950/ton CIF Turkey. Still, we do not expect a demand uptick from Turkish buyers given the year-end lull and poor end-product orders amid economic challenges."

Some players also think that Russian PE cargos will continue to find their way to Turkey in the days to come, heating up the competition with Middle Eastern and US origins. A Turkish converter said, "We expect Middle Eastern PE offers to post around $40-50/ton drops, at least, succumbing to a widespread talk about US PE offers below the $1000/ton CIF Turkey mark for LLDPE and HDPE film for December."

Skepticism about recovery in China’s polyolefin

The cautious recovery in China’s PP, PE and PVC markets was surely brought to the agenda at the fair. The sustainability of the recent firming has been mooted among global players. The skepticism emanated from a slew of factors, including the rising Covid cases in China versus the government’s aim to ease measures, the prevailing pressure from overseas cargos that may stay present in Asia due to the approaching holidays in Europe and a supply overhang, not to mention slumping freight rates.

So far, December PE offers have been revealed with monthly drops to Southeast Asia as the region has been unfazed by slightly firmer levels in China markets.

A cautious bottom appears in sight for PVC

In the meantime, PVC sellers argued that prices might have been nearing to the bottom following dramatic drops in Turkey. Some buyers were lured back to the market in November in response to tempting offers at fresh lows.

Adding to the scene has been a respite from drops for US PVC cargos amid some talks about higher export offers out of China and the possibility that December might be the last month of drops from a Taiwanese major following a long series of price cuts.

Traders also argued that European producers may reduce their allocations now that caustic soda prices have leveled off and sellers have already depleted their stocks in Turkey’s PVC markets to preserve their margins amid poor derivative demand at home. Based on the narrowing premium over Asia and the massive discount to Europe, prices in Turkey do not have much room left for new drops regardless of the state of demand, according to a trader.