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PP demand fares better than PE in Turkey

by Merve Madakbaşı -
  • 14/01/2022 (01:58)
Turkish polyolefin markets started 2022 with opposite trends as PP prices were bolstered by pent-up demand, particularly for raffia grade. Nonetheless, PE has yet to respond to upward corrections for PP, mainly because weak demand continues to pervade the market.

PP raffia underpinned by demand recovery in Jan

The PP market reversed course in January as converters returned to the market after an absence of almost 2 months. Raffia converters decided to replenish their stocks following their year-end book closures as they realized the market had bottomed out following rapid drops throughout November and December.

According to the ChemOrbis Product Snapshot below, import Saudi Arabian PP raffia prices have recovered by $30/ton, while PP fibre and injection prices have also edged up by around $10-25/ton compared to late December levels.

*Right click the image and open in a new tab to view the full-sized snapshot.

Import Prices– PP Raffia – PP Fibre – CIF Turkey – PP injection

Activity remains modest for other PP grades

Prices for other PPH grades also responded to the recent upturn. This stemmed from a spillover impact from raffia, while adding to the scene has been the easing supply pressure on sellers thanks to their depleting activities in late 2021.

Plus, the re-emergence of logistic snarls across the board helped sellers renew confidence to some extent. The Omicron variant has had knock-on consequences and pushed freight prices up further for certain routes as 2022 kicked off. Indeed, congestion and reduced manpower in key ports in China ahead of the Lunar New Year holiday caused jitters about renewed logistical turmoil for Q1. This came on top of a lack of sufficient truck drivers, which has already hit inland deliveries across Europe and the USA.

Still, demand for PP non-woven, fibre, and injection has lagged behind the revival of raffia so far in Turkey. A global trader opined, “Non-woven consumers secured their needs in late Q4, which kept activity slow. Nonetheless, we expect buying interest to pick up for this grade due to possibly higher consumption of masks amid the rising infections in Turkey.”

Early PP expectations voiced for next month

Players expect the PP market to maintain its strength moving forward, so long as demand remains regular, while they do not project sharp hikes next month.

A large buyer commented, "Several buyers replenished their stocks in January, which will probably cause muted demand next month. PP raffia may settle around $1450-1500/ton CIF for origins subject to 6.5% duty, while we believe buyers would not show interest in any level above $1500/ton."

PE maintains downtrend into H2 January

Prices remained on a downslide in the PE market as sentiment defied the recent upturn in PP offers. Most players attributed this to the lackluster demand for most grades amid cash issues, a challenging domestic economy, and a low season for certain applications.
Moreover, players did not voice any severe supply concerns despite the logistic hurdles.

HDPE performs better than LDPE, LLDPE

Nevertheless, HDPE film demand has been better than LDPE and LLDPE C4 film, both buyers and sellers affirmed. “Relatively limited availability spurred some buying interest this month for HDPE film. On the contrary, lower prices failed to buoy interest for other grades,” multiple sellers admitted.

*Right click the image and open in a new tab to view the full-sized snapshot.

Import Prices– LDPE – LLDPE – CIF Turkey – HDPE

As can be seen from the ChemOrbis Product Snapshot above, LDPE took the lead in the bearish run amid comfortable stocks, with Middle Eastern prices posting a triple-digit decline in total for January. HDPE film prices were down by a relatively modest amount of $65/ton (4.5%) in the period, however.

Will PE bottom out in February?

Some players expect PE prices to reach the bottom by next month as the sentiment may face a spillover impact from a relatively firm PP market compared to the previous months.

According to the weekly average data from ChemOrbis, the premium of Middle Eastern LDPE offered on a CIF Turkey basis over China has narrowed to as low as $80/ton, proving that prices may not have further room to decline for this product. This is also based on freight differentials between Turkey and Asia as well as the cautious firming in China’s import PE markets. As a side note, the delta between Turkey and China stands at $205/ton for HDPE film and $260/ton for LLDPE C4 film.

The pricing policies of US suppliers will be among the key factors to watch in the coming term. For American origins, the sentiment appeared mixed, with thin buying interest toward distant cargos on the one hand and inland logistical mishaps in the United States on the other.

A few players said, "US suppliers may not be that eager to sell to Turkey as the market fell notably, and a lack of truck drivers coupled with the Omicron impact on global logistics may hinder their exports in the upcoming term." Some Chinese players reported hearing firmer US offers this week, too.

Economic challenges remain a concern

Although the outlook for February appears stable to firmer for PP and PE is expected to respond at some point, the demand outlook remains under pressure from the volatile economy in the medium term.

Despite the recent stabilization in the USD/lira parity, the local currency remains much lower from the previous months while PP and PE converters complain about cash constraints, a credit crunch, and logistics-hit exports.
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