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Premium of HDPE over LLDPE hits 16-month high in Turkey

by Merve Madakbaşı -
  • 16/10/2020 (07:14)
Turkey’s PE market opened October on a firm footing as reduced import volumes and poor netbacks propelled higher offers. Prices moved up for almost all origins except for Europeans. However, LLDPE somehow failed to absorb the entire hike sought by sellers.

Comfortable supply curbed larger gains for LLDPE

Participants attributed LLDPE lagging behind the rising to more-than-adequate availability as well as tepid activity for this product.

As can be seen from the graph obtained from ChemOrbis Price Wizard below, the local LLDPE C4 film market has followed a steady trend since October kicked off, defying higher import offers. On a weekly average basis, prompt LLDPE C4 film cargos are currently trading at a discount of $80/ton to HDPE film, while their discount to LDPE is much higher at $195/ton.

“We expected LLDPE to catch up with the firming in the market as US suppliers are still unable to ship much material amid a stormy season in the country. The previous expectations that manufacturers would raise their LLDPE consumption due to much higher LDPE offers have fizzled out,” a major player commented.

Middle Eastern LLDPE traded $60/ton below HDPE film

Most PE producers from the Middle East sought increases of $50-70/ton in Turkey since their vivid sales to China in the last couple of months led to quite limited volumes. The other story line was unfavorable netback in Turkey which prompted suppliers to prefer other outlets to direct their remaining cargos.

HDPE hikes have shined out so far in October amid better demand and less supplies when compared to previous weeks. LDPE sellers have remained free from stock pressure amid less capacity worldwide compared to other PE products with buyers accepting the latest round of hikes.

Nevertheless, LLDPE C4 film offers above the $900/ton CFR Turkey threshold failed to turn to deals in most cases. “Sell ideas were voiced as high as $950/ton at the beginning of the month before sellers yielded to sluggish demand and consented to small step backs,” noted a trader.

According to ChemOrbis data, the weekly average price of import HDPE film stands $60/ton above LLDPE C4 film for Middle Eastern origins. This is to say, HDPE film is carrying the widest premium over the latter one since June 2019.

Near-term outlook is supported by rising China market

Overall, PE sellers renewed confidence this week now that import prices in China have been pushed up by the resumption of demand amid seasonal factors. The post-holiday trend has also been fueled by lower-than-expected polyolefin stocks inside the country, gains on Dalian Commodity Exchange and unexpectedly lower supply from Iran for LDPE in particular.

The Turkish PE market is projected to retain its firmness under the reemerging pressure from higher China over the near term.

Yet, a global pandemic and the depreciation of Turkish lira against its peers may keep denting buyers’ appetite for larger purchases heading to the year-end.

Plus, spot ethylene prices in Asia signal a weaker trend for November amid rising exports into the region which appears as another factor to keep an eye on for the upcoming term. A large scaled PE buyer opined, “The market may remain at current highs for the rest of October. Still, we need to gauge the sustainability of the bullish trend in China to obtain clues about the November outlook.”
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