Slack demand dominates polymers ahead of Eid al-Adha, yet freight support still intact in Türkiye

Prices for most polymers defied the lower upstream chain in June as successive increases in shipping costs amid logistic hurdles provided sellers with leverage to lift their prices. Yet, ebbing demand has come to the fore recently, outweighing supply curtailments and capping larger price hikes.

PP outperforms PE amid tighter supply

In polyolefin markets, import dutiable Middle Eastern prices gained 1-3% ($20-40/ton) from a month ago, bolstered by a freight rally, according to the weekly average data from ChemOrbis.

PP pioneered the bullish trend back in May as dwindling supply propelled prices higher regardless of the trajectory of feedstock markets. Following suit, PE stabilized late last month before turning up in June fueled by reduced import supply for certain LDPE grades.

In the meantime, LLDPE and HDPE film hikes failed to catch up with LDPE as demand was moderate and supply was rather adequate for these two. The disappearance of competitive American PE cargos coupled with tight availability for LLDPE with additives still lent support to suppliers. Nonetheless, HDPE grades continued to face pressure from the abundant supply from Iran. “Even LDPE buyers were unwilling to pay prices above the $1200/ton CIF mark for distant Middle Eastern cargos as supply is not tight for every grade and PE demand is not as strong as PP,” a trader said.

As for PP, adding to the firmer scene than PE was a lack of Far East Asian cargos, with container shortage amid port congestions and surging freight rates preventing South Korean and Chinese cargos finding their way to Türkiye. Deeper supply constraints took their toll on PP copolymer supply while PPH trended higher, particularly for raffia, owing to limited spot volumes from Russia and transit times of up to 3 months for Saudi Arabian volumes.

“Demand for PP has been a tad better than PE in H1 June while raffia shone out due to reduced local supply and seasonal factors. PP fibre demand was not that robust, though,” players concurrently said.

Lackluster derivatives curb PVC hikes

PVC has been the latest product to respond to climbing ocean freight rates among all polymers, with import K67 prices gaining 3-5.5% ($30-45/ton) from late May levels. This is compared to increases of up to $60/ton in other markets, such as India and Egypt, as per the weekly average data from ChemOrbis.

Triggering the bull run in Asia were higher June offers from a Taiwanese major in Asia and better demand in India. Moreover, July expectations do not rule out the possibility of larger hikes from the producer, given shipment issues reported at ports in South Korea and Taiwan. On the other side of the coin, disrupted deliveries from China are likely to cause domestic PVC supply to accumulate, which may counterbalance the upbeat.

PS and ABS respond to falling styrene prices

Unlike the PP, PVC and PE markets, where import prices were bolstered by falling volumes from global suppliers and defied falling upstream costs, styrenics faced downward corrections in H1 June. This was because the combination of holiday lull, eroding styrene prices across the board, and arrival of some delayed cargos prompted buyers to stick to the sidelines and caused prices to level off.

As for PS, South Korean offers remained supported by the logistic hurdles, whereas sellers had to trim their earlier offers in response to stiff resistance from buyers. Prices stabilized, succumbing to domestic and European cargos that faced discounts from May driven by plummeting spot styrene prices in Europe.

In the ABS market, the local market continued to lack premium over imports given the easing supply, while import sellers stepped back from their hikes to stimulate buying interest for distant cargos.

Rising trend falters in PET bottle markets, prices mostly stabilize

Soaring shipping costs from Far East Asia found a reflection on PET bottle markets in late May, with both import and local prices moving north. Nonetheless, the pre-holiday demand failed to catch up with sellers’ hike goals, and increases were limited to $15-30/ton (1-3%).

This week, volatile crude oil futures, which pared some of its losses after slumping last week, as well as a widespread wait-and-see attitude among buyers resulted in range bound PET bottle prices. “Elevated delivery costs weighed on demand for distant import cargos, prompting buyers to meet their modest needs from the local market,” sellers admitted. Whether the market will resume its upward trend following the holidays remains to be seen, with high freight rates and seasonal hopes on the one hand and a stable to softer trend in Asia on the other hand.

Questions swirl around post-Eid scenarios

Now that transportation issues are not projected to ease anytime soon, all markets will remain underpinned by elevated freight rates. However, Turkish players are at odds about the post-holiday demand outlook. Polyolefin and PVC prices seem on the verge of new hike attempts, so long as shipping costs add to their gains, as traders put it. Netback calculations based on import prices in Asia suggest that the upward pressure on import PVC and PE prices persists in Türkiye.

Sellers affirmed the recent slowness in resin demand but hope to see a traditional uptick in activity right after the Eid al-Adha holiday. They say, “Manufacturers plan to suspend operations during the long break. Yet, they may try to hedge against additional hikes amid squeezed margins on the side of resin sellers and delivery disruptions.” Meanwhile, converters point to the approaching summer festivities across Europe as a potential drag on their exports, let alone the impact of a lack of containers.

“High interest rates will likely keep consumption hindered, with no meaningful improvement in the construction sector in sight for the short term. Food packaging may support the polymer industry to some extent amid the tourism season while eyes will stay on resin supply,” players opined.

A packager said, “Macroeconomic headwinds continue moving into H2 2024. We do not expect a major demand pickup following the holidays. Still, derivative segments may receive support from the high summer season for certain applications. Logistic snarls may force buyers to engage in regular purchases for autumn deliveries, usually when exports recover following the summer holidays across the board.”