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PP discounts fail to spur enthusiasm in Turkey

by Merve Madakbaşı - mmadakbasi@chemorbis.com
  • 22/04/2022 (07:26)
Turkey’s import and local PP markets added to their losses this week as more sellers succumbed to a lack of buying interest from converters. Nonetheless, additional discounts have failed to boost demand so far as pre-holiday trade remains thin.

Import PP moves slightly below new thresholds

Sellers have been reporting lackluster demand since around mid-March. Inflationary pressures have hit end-user demand for PP applications, which has led to reduced purchasing activity among manufacturers and a weaker trend than PE. Adding to the scene has been a traditional Ramadan lull and sufficient stocks at warehouses.

“The demand outlook is not promising for the near term now that some converters claim to be covered until July. Orders from derivative markets have been slack as carpet exports and sack business have been curbed by holidays across the board, ongoing container issues and high inflation,” commented traders.

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

Saudi Arabian PP raffia, fibre and injection offers broke slightly below the $1650/ton and $1700/ton thresholds, respectively in some cases this week. The ranges were assessed $20-30/ton lower on the week at $1630-1670/ton and $1680-1730/ton CIF Turkey, subject to 6.5% duty, cash, respectively.

In PP copolymer markets, sellers have been struggling to conclude sales, which has resulted in downward adjustments in the import channel. Prompt South Korean PPBC inj. offers emerged at $1910-1930/ton FCA Turkey. They offered a competitive edge relative to $1980-2000/ton CIF earlier in April, while reflecting traders’ efforts to deplete their stocks.

Locally-held PP raffia lacks premium over imports

Apart from the Ramadan lull and financial woes, many players attribute the thin demand for import cargos to more competitive prices in the prompt markets.

The cost of the lowest Saudi Arabian PP raffia price at $1630/ton CIF comes to $2080/ton inc VAT without distributor’s margin. Yet, there are offers below $2050/ton inside for prompt materials, mirroring the ongoing slowness in the market.

Weak May expectations weigh on activity, too

The majority of the market expects PP drops to continue in May as the support from costs seems to be less strong when compared to the previous weeks. Fluctuations in crude oil futures and soft projections about the next propylene contracts in Europe have dented sentiment.

"Some converters in the southern region are readying to shut their factories for the holidays, also considering sluggish end markets. Besides, they aim to reduce their utility costs amid shorter working days next month. Hopes for a demand recovery seems to have been postponed until later summer," a manufacturer said. Another consumer thinks that PP producers may boost their raffia production if activity for PP fibre stays mediocre. This may put a pressure on raffia prices.

Some market participants believe that prices will remain close to current levels with minor fluctuations if demand picks up after the Eid al-Fitr holiday and crude oil remains above the $100/bbl mark. A source from a Saudi Arabian producer commented, "PP prices may see modest drops next month as the market is strained by stagflation."

Chinese and Russian cargos to remain under watch

On the other hand, some players are more pessimistic about the future trend and expect notable drops if the pressure from competitively-priced origins persists.

Indeed, Russia’s Sibur shut its polyolefin units this week for technical reasons, sources familiar with the issue said. Traders have been offering prompt Russian homo-PP cargos at competitive levels in recent weeks, which has played a key role in discounts from Saudi Arabian suppliers. A global trader thinks that the producer has plentiful stocks, but the recent shutdown may offset slow demand across the board to some extent.

The market has also been under pressure from Chinese PP offers with break-bulk shipments. The Covid-hit demand at home prompted Chinese producers to focus on their exports to Southeast Asia and Turkey. These sellers have been eager to ease their stock pressure to an extent that logistic snarls allowed amid severe port issues related to lockdowns.

It remains to be seen whether or not Chinese cargos will continue to find their way to Turkey next month. Indeed, uncertainties regarding the duration of lockdowns linger for now, although the government has stepped up to ease measures in phases.

Chinese PPH offers were last reported at $1590-1630/ton FCA Turkey, subject to 6.5% duty for raffia, fibre and non-woven grades. “Some cargos are due for June arrival, while the estimated time of delivery for some of them are uncertain,” noted a player.

Projections for post-Ramadan demand

Demand may show a nascent recovery right after the holiday as the market has been slow for weeks now. Still, players are skeptical about a real revival in the post-Ramadan period given the slow carpet exports to the US and Europe. A manufacturer commented, "Exports to the Middle East may pick up after the Eid al-Fitr holiday, but war-related uncertainties and volatile energy markets lead to a blurry outlook." Players will monitor the outcome of the Domotex Fair that will take place in Gaziantep on May 12-17, 2022 in the medium term.

If overall activity does not visibly recover, sellers will not be able to hold the market flat, according to several buyers. This is considering that sellers’ stocks may have piled up during the long sluggishness across the board. Eyes will also remain on the post-Easter demand in Europe as sellers will need to see whether or not they can direct their cargos to the region.

A seller opined, “We expect to receive some inquiries by around mid-May. Nonetheless, the recovery may not be enough to lift the market on the assumption that most buyers will prefer to use their stocks on hand while also monitoring global trends and end product orders.”

In industry news, the government imposed a regulation on April 19 that obliges players to make their payments on Turkish lira basis for any movable goods. The impact of the news on business has yet to be seen while the regulation may cause extra costs stemming from the bank percentages and parity changes may also pose risks, according to sources.
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