Polymer demand cools in Turkey: Is price correction ahead for PP, PE and PVC?
Import PP prices turned mostly stable at more than 2-month high
PPH prices moved steadily north since they bottomed out in May on the back of returned demand, rising production costs and dwindling prompt supplies. In total, PP raffia have spiked 20% on average since then, data from ChemOrbis revealed. This also triggered almost a 14% increase for PP fibre despite lull end demand from export markets.
The rapid increases coupled with unplanned supply issues on the side of domestic polyolefin producer, Petkim, generated greater demand from Turkish converters. Optimism led by the re-opening of several European markets contributed to the uptick in buying sentiment.
Nonetheless, players started to question the endurance of the rally last week, claiming that PP raffia prices rose too much regardless of smaller hikes in China. The weekly average data from ChemOrbis, the prevailing PP fibre market is carrying just a $10/ton premium over raffia, the smallest since July 2018.
Meanwhile, Turkey’s import PPH raffia market is currently carrying a premium of $81/ton over the levels in China, the weekly average data from ChemOrbis showed.
Middle East PE may see small hike attempts, US signaled correction
The unfavorable position of American PE against Middle Eastern origins has taken the center stage moving into the second half of June. US cargos lost their advantage over Middle Eastern offers as the two traded almost at par following sizable hikes since last month. Although suppliers tested levels above the $800/ton threshold CFR Turkey, they faced thin interest based on their longer delivery terms and narrow gap with other origins.
As can be seen on the ChemOrbis Market Snapshot below, the increases in US HDPE and LLDPE film prices surpassed Middle Eastern origin on an average when a comparison to 2 months ago is made.
*Right click the image and open in a new tab to view the full-sized snapshot.
Traders admitted, “Offers and buy ideas now have a large gap as any HDPE or LLDPE film prices above $800/ton can hardly work. Many buyers seem to be avoiding July shipment cargos citing the unclear outlook for August. Plus, they have already wrapped up their purchases during the fast upturn.”
A converter reported to ChemOrbis that he was offered LLDPE C4 film below $800/ton towards the end of this week. Although this price was not widely confirmed by other players at the time of publication, he said: “I believe American PE has already given signals of a step back as activity tapered off in Turkey.”
As for Middle Eastern origins, some players expect initial July offers to emerge with modest hikes so long as oil prices remain near $40/bbl. This is also based on a possibility that volumes from the region stay reduced similar to June. Yet, demand will determine whether or not gains will be digested by the market.
Although the energy complex has been volatile given the rising number of infections in China, Japan, the US, South American and Africa over this week, feedstock prices’ response has been mild. Early expectations for July monomer contracts called for small hikes, according to some participants.
Looking at theoretical netback, the latest price levels in China do not exert any downward pressure on Turkey’s import PE markets, as a side note.
Buyers found European PVC at $850/ton CFR unreasonable
Likewise, PVC consumers secured as much material as they can throughout the bullish run which led to a jump of more than 20% in prices just in a month. The main driver behind large hikes was vivid exports to China and India where markets returned from virus-led lockdowns.
Import K67 prices have jumped 24% in cumulative since May as neither European nor US sources were generous to Turkey when it comes to supply amid higher costs and hopes for a demand recovery across the board.
Profile manufacturers said, “We prefer to hold back for a while since we will be receiving our materials that were dealt at much lower levels. The building industry picked up, but we long for fresh construction projects.”
A West European producer lifted its K67 offers for a limited allocation to $840-850/ton this week but met resistance from most customers, as was widely confirmed. A trader affirmed, “Buy ideas moved back to $800-810/ton with some converters seeing a correction in the market most likely.”
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