PP, PE poised for new hike attempts on heels of tightness in Turkey

Turkey’s polyolefin markets bounced from multi-year lows in late December once suppliers completed their traditional destocking activities for the year-end. PP and PE prices have recorded relentless increases since then as snug supply and active demand reinforced the bullish run.

PPH prices spiked 10-11% in less than 2 months

According to the weekly average data from ChemOrbis Price Index, import PP raffia and fibre markets have increased by 10-11% since late December. Reduced allocations from Saudi Arabia and Egypt boosted demand and attracted buyers to the market to replenish their inventories in fear for additional hikes.

Waning supply from Egypt penetrated PP market

The bullish trend sped up as January proceeded since lower Egyptian supplies paved the way for more rapid hike requests. This was comprehensible considering the fact that Egypt ranked the second top PPH supplier of Turkey following Saudi Arabia with more than 225,000 tons of imports during January-November 2019.

To track Turkey’s imports by country, please click here (For members only)

More production cutbacks on the corner

The rumor has it an Egyptian PP producer declared a force majeure on its supplies while this information was not confirmed at the time of publication. The company was planning to shut its Port Said plant for maintenance works in March.

On the top of already reduced supply from Egypt, the period of February-March is set for scheduled turnarounds in Bulgaria, Russia and Saudi Arabia, noted many players.
“Al Waha Petrochemical Co. and SPC are among Saudi PP producers that are facing planned or unplanned supply constraints,” a source familiar with the issue reported to ChemOrbis this week.

Reduced volumes sent HDPE, LLDPE to multi-month highs

A similar scene pervaded the PE market, too, as a lack of adequate supply from regular Middle Eastern sources paved the way for visible January hikes. Import HDPE and LLDPE offers have risen by 11-12% on a weekly average since late December, ChemOrbis data suggest. The total hike amount for LDPE hit 18% driven by low stocks at the domestic producer, Petkim.

A Saudi Arabian major lacked prompt availability particularly for LLDPE. Another Middle Eastern supplier is readying for a PE maintenance shutdown in February, which will probably lead to limited LDPE, HDPE and LLDPE allocations from the company to Turkey for another month.

Will tightness rule out the impact of gloomy outlook in China, lower crude?

Nevertheless, players are questioning whether or not sellers’ hike targets will prove to be workable amid a bundle of opposing factors. At first, activity in Turkey has cooled off after converters built some stocks in fear for additional hikes. “Against the perspective of most sellers, prices may level off in February due to a gloomy global outlook in petrochemicals,” a trader opined.

Hopes for an improved demand in the post-holiday period have recently been dented in China due to evolving woes over new coronavirus outbreak in Wuhan which spread to more than 15 other countries. The government officially extended Spring Festival holidays until February 2 while holidays are due to be prolonged for one to two weeks in certain cities with death toll reaching 170 as of January 30. Trading in China has already been hit in several industries including food, beverage and automotive.

Rising concerns over pandemic virus pulled energy complex down for the most part of this week, moreover. This is also likely to weigh on downstream PE markets in the days to come.

Some Turkish players also opined, “February olefin contracts settled flat in Europe in contrast to the earlier expectations for slight hikes. We don’t expect major changes in fresh PP, PE offers from Europe.”