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PP, PE rally wavers in Türkiye; March outlook under discussion

by Merve Madakbaşı - mmadakbasi@chemorbis.com
  • 23/02/2024 (01:10)
Türkiye’s polyolefin markets saw the bull run lose steam last week since panic buying subsided amid the imminent arrival of delayed cargos. More importantly, resistance to the prevailing highs came to the fore, with more manufacturers reporting having a hard time reflecting their sharply higher resin costs onto end users. This week, both PP and PE prices were assessed flat between high costs and lethargic demand.

CIF Türkiye – Import Prices– PP – PE

Polyolefin prices soar by up to 25% in 2 months

According to the weekly average data, Saudi Arabian homo-PP prices have jumped by 23-25% ($220-250/ton) in total since sentiment turned bullish in late December, driven by global supply chain disruptions. PPBC injection prices for the same origin also posted a cumulative gain of 20% ($220/ton) in the same period, given reduced volumes and elevated freight rates from Türkiye’s second largest copolymer supplier, South Korea.

Looking at PE grades, offers have surged by 12-17% ($125-165/ton) over the past two months, with LDPE and LLDPE posting larger gains than HDPE along with tighter supply. Meanwhile, the arrival of cargos from nearby Iran provided some relief to HDPE grades as February wore on.

Indeed, PP took a bigger hit from the tight availability as it depends on imports more than PE. This led to larger gains for the product as compared to the PE grades.

Demand ebbs significantly as derivative orders fail to catch up

Import PPH and PPBC prices have reached their highest levels since July 2023, as per the weekly average data from ChemOrbis, while PE offers for all grades have hit around a year high following a new round of hikes in February.

Multiple players commented, “Demand was robust back in January due to panic buying among converters, most of whom faced delivery delays and paid notable hikes for prompt or nearing cargos. Nonetheless, downstream segments failed to catch up with steep resin hikes. More buyers have had a hard time passing through their surging costs onto end users, which caused some resistance to mount toward fresh highs.”

No more hikes projected in March as elections and Ramadan loom

March expectations offer a mixed bag now that the bullish trend has wavered for both PP and PE following relentless hikes. Even if sellers test the market with additional price hikes, blaming strong upstream costs, more players seem convinced that polyolefin markets cannot digest new gains.

Global traders confirmed slower resin demand in Türkiye, pointing to the potential effects of Ramadan and local elections on activity for next month. “We feel that the market may not digest any further hikes going forward. Buyers tend to avoid distant cargos as they are covered for now and risks of a downward correction loom over the market along with the imminent arrival of cheaper cargos,” one of them said.

Sellers may seek rollovers based on lethargic demand and strong costs on the side of petrochemical producers. The lingering Red Sea unrest will keep transit times longer than usual whereas the impact will be stymied by the Ramadan lull and cash constraints, let alone an easing supply outlook inside.

Buyers think the corrections in shipping costs may help the market get rid of its bubble to some extent by April, if not late March. The local market may see discounts so long as demand remains subdued, as some of them put it. However, traders believe the market will hold onto current highs, underpinned by the bullish scene in Europe and high upstream chain.

Still, high costs and post-CNY trends to stay under close watch

Although freight rates have been seeing downward corrections over the last few weeks, they remain well above the pre-Suez crisis levels. The lingering unrest in the Red Sea will continue to keep lead times longer than usual for a while more. Hence, PP and PE prices may hover close to their current levels, as sellers put it, let alone the impact of firmer crude oil futures and olefin prices.

In the meantime, players should keep a close eye on the post-CNY trend in Asian polyolefin markets in the coming term. Domestic PP and PE stocks in China accumulated during the long break in line with expectations, while converters have yet to fully resume their operations. At the time of writing, Türkiye’s premium over China’s import PPH market stood as high as at $285/ton while PE’s premium ranged from $125/ton to $180/ton depending on the grade on a weekly average. This is to say, the future trajectory in the region may play a role in setting the tone of Türkiye’s import polyolefin markets.
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