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Questions swirl in Türkiye markets: Will PP, PE, PVC declines slow down? Any sign for an end in sight?

by Merve Madakbaşı - mmadakbasi@chemorbis.com
  • 16/06/2023 (00:12)
Türkiye’s polymer markets have extended their losses into June in response to lethargic demand amid cash constraints and subdued downstream markets. Adding to the bearishness has been a global weakness in resin consumption stemming from economic woes across the board, while costs have not been supportive either.

While import PP, PE, and PVC prices have been hovering around their multi-year lows ahead of a long break next week, players started to question whether the bottom is nearing or not based on a slew of domestic and global factors.

CIF Türkiye – Import prices – PP raffia – PVC K67 – HDPE film

PPH nears $900/ton, PE quite close to $950/ton CIF

Both PP and PE prices sank to new lows in June as buying appetite remained hammered by persistently slow derivative demand at home. Several converters lamented about their slower exports amid macroeconomic challenges across the board, let alone the lingering cash constraints in Türkiye.

“Although new lows stimulated buying interest to some extent, tough competition in the import market amid aggressive Middle Eastern origins prompted buyers to push for further drops on deals. It has been “a buyer’s market” since mid-Q2, while the approaching holiday weighed on activity further,” large traders admitted.

According to the weekly average data from ChemOrbis, Saudi Arabian homo-PP raffia, fibre and injection prices have been down by 18-19% ($210-230/ton) in total since the sentiment first weakened in late Q1. Similarly, Middle Eastern PE prices have posted a cumulative drop of 19-20% ($230-250/ton) for LDPE and HDPE film, while LLDPE C4 film receded by 16% ($190/ton) in the same period.

This week, PP raffia and fibre prices hit $910/ton and $940/ton, respectively, on the low ends of the assessments, both CIF Türkiye, subject to 6.5% duty, cash. The rumour has it that raffia was also sold at $900/ton CIF but this was not confirmed at the time of writing.

Middle Eastern LDPE, LLDPE and HDPE film prices were all assessed at $970-990/ton with the same terms and indicated further drops on the week. This was because earlier offers in the low-$1000s/ton met buyers’ stiff resistance under the shadow of competitive ex-USG cargos for August.

“We expect PE prices to see the low-$900s/ton CIF Türkiye next month unless China shows a solid recovery during the Eid al-Fitr holiday,” said a converter.

Pace of PVC declines decelerates, but demand still an issue

The downward trend for PVC kicked off earlier than PP and PE in Türkiye as a demand destruction started to drag import prices down in H2 February this year. Since that time, import prices have remained weak in line with other major PVC markets, while supply has not been an issue owing to plentiful material from Europe and the US.

ChemOrbis data revealed that duty-free and dutiable K67 markets have sunk by 21-22% ($200-235/ton) during the last 4 months. Among the main culprits behind the bear run, high stocks in India and subdued activity in Europe caused global sellers to direct more cargos to Türkiye. This was also due to suppliers’ hopes for a demand boom in the aftermath of the twin-quakes back in early February.

For July, there have been head-stretching questions about the next PVC trend, with a bleak demand outlook amid economic woes in Türkiye and Europe on one hand and the recent attempts of PVC sellers to lift the sentiment in Asia on the other hand.

Eyes on Asian markets as gap narrows

Players have started to discuss whether the bottom is near for PP, PE and PVC or not following the hefty decreases that took place in recent months. Although demand may not revive much right after the holiday, as sellers admitted, theoretical calculations based on China indicate that import prices on CIF Türkiye basis may not have much room left to move down. This is particularly if China’s import markets manage to sustain their current levels without any further declines.

“Import prices in Asia have been rather steady this week as producers have been trying to manage their stocks with rate cuts or shutdowns. Still, we are not sure about the sustainability of these efforts, while it remains to be seen whether overall activity will respond in the coming days,” opined some players.

According to the weekly average data, Türkiye’s premium over Middle Eastern prices in China has narrowed to $90/ton for PPH, $55/ton for LDPE and $80-85/ton for HDPE and LLDPE C4 film.

As for PVC K67, dutiable offers on CIF Türkiye basis have been trading with a premium of only $45/ton over China, while they have been mostly at par with India and SEA markets.

Spillover impact from muted demand in Europe

It is worth noting that ebbing resin demand and subsiding derivative orders from Europe have had a visible impact on Türkiye. Indeed, dramatic PP and PE declines coupled with slow PVC activity in the region have resulted in increased volumes from the region since May.

Players voiced their concerns about the ongoing recession surrounding European markets, as it may continue to hit consumer spending in the region throughout Q3.

“Competitive LDPE prices as well as rising PVC allocations from Europe put a strain on Türkiye in June. We also heard aggressive PPBC injection prices, mirroring a lack of healthy demand in the region. It remains to be seen whether these cargos will continue to find their way to Türkiye considering the nearing summer holidays,” noted a trader.

A PVC trader expects European K67 prices to touch $800/ton CIF, blaming poor demand and ample supply within the bloc. “Still, prices may stabilize as July proceeds, depending on the trajectory in Asia.”
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