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Sentiment in Turkey’s PP, PE markets defies faltering in China

by Merve Madakbaşı -
  • 25/12/2020 (09:31)
Polyolefin markets of Turkey are readying to end 2020 on a strong note. Notable hikes passed on December transactions amid intensifying logistic issues and healthy demand. Moreover, the sentiment for January retains its firmness despite a recent slackening in China.

Indeed, import and local prices in China have been stable to softer during most of December. The reasons behind the faltering were the volatile Dalian Commodity Exchange market and seasonally waning demand before the year-end.

Cold weather conditions caused several Chinese cities to impose restrictions on electricity use. Environmental inspections targeting downstream plants also weighed on activity. On the other side of the coin, reduced overseas supply limited the downward corrections for most PP and PE products. HDPE was an exception due to the ample supply for this product.

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

Import HDPE, LDPE, LLDPE - CIF - Turkey vs China

Why has Turkey responded to the year-end lull mildly?

Part of January cargos were already sold with hikes

Both buyers and sellers concur that some January shipment cargos were already sold from December. An agent of a Saudi Arabian producer reported to ChemOrbis, “We are mostly sold out for January since the demand was quite active in the first half of December amid inadequate availability. A lack of equipment in transportation and disrupted operations on ports amid the pandemic led to a panic among buyers and spurred appetite at the time.”

According to the weekly average data from ChemOrbis, import PPH prices have climbed $62/ton for raffia (4.7%) and $85/ton (6%) for fibre grade in 3 weeks.

New hike attempts are projected for next month

Players mostly adopted a wait-see stance this week after wrapping up their monthly business previously. Sentiment remained firm on the sellers’ side due to higher freight rates and a lack of sources from Israeli, South Korea, India, Uzbekistan, the US, and Azerbaijan.

“European PP and PE makers may not return from Christmas Holidays before the second week of January, which would keep offers limited from the region. The higher expected outcome of January olefin contracts also keeps the scene strong,” opined traders.

Some participants also think that the current domestic polyolefin stocks inside China, which stood at 620,000 tons this week, were not high enough to deepen price corrections over the coming term. “Plus, the ongoing container shortage may offset slowing demand in China to some extent and keep the downside in check,” a trader argued.

Size of possible hikes remains unclear amid improved netbacks

Official PE announcements from the Middle East are pending for January, while buyers expect to hear some further hikes so long as regional quotas remain limited. An agent of a Saudi Arabian producer said, “Our supplier plans to raise its prices, yet the size of hikes remains unclear for now.”

Although a few traders talked about increases of $50-60/ton on supply constraints for certain products, PE converters see hike requests of $20-30/ton more likely. “We are aware of the fact that freights may not cool off until mid-February. Prices may gain further ground in Turkey but only if demand supports and China does not see larger drops. Markets may shift direction in late January or February although nothing is certain,” a buyer commented.

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

Import PPH - CIF- Turkey vs China

For PP, buyers believe that prices will settle at or close to their December levels next month. “It seems there are not many January cargos. Still, we do not see further hikes on deals likely since Turkey already carries a large premium over China, which is hard to sustain. Turkey may attract import cargoes and we may even see discounts in the latter part of next month,” said a manufacturer.

Plus, the low season is starting for the sack industry soon and demand may be tepid for a while, as PP participants put it. A PE converter similarly said, “Colder weather conditions in the eastern part of Turkey may hamper domestic end business. Exporters to Europe will also face slowing orders amid year-end holidays.”

According to ChemOrbis data, Turkey’s LDPE market trades on par with China’s import market on a weekly average. However, the overall LLDPE C4 film and HDPE film markets consisting of all origins are carrying a premium of $83/ton and $147/ton, which explains buyers’ cautiousness toward additional increases.

Expensive transportation costs support sellers

Still, soaring shipping costs amid the impact of COVID-19 pandemic and equipment issues are expected to dominate global commodity markets until mid-February or early March.

Players reported receiving notable hikes for new shipment PP and PE cargos from Iran this week. Traders noted, “Freights from the country surpassed $100/ton, and the recent export prices out of Iran are not affordable under these circumstances. We plan to sell our existing stocks instead of engaging in new cargos.”

Talks about planned turnarounds in the Middle East for Q1

A Saudi Arabian PP producer is said to be mulling over conducting a turnaround in March. A Middle Eastern PE producer will reportedly shut its plant for scheduled maintenance in February, although this was not widely confirmed at the time of publication. In case these plants go offline, allocations from the region may remain modest despite tempting netbacks in Turkey.

Post-holiday appetite in China will be closely monitored

Turkish players expect new polyolefin offers to emerge after the New Year holiday as next week will be shorter in terms of working days. It remains to be seen at which levels the market will settle amid mixed dynamics. Uncertainties related to the outbreak and mixed predictions about post-holiday demand from China in H2 February blur the medium-term outlook.
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