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Supply issues take center stage in Turkey’s polymer markets

by Merve Madakbaşı -
  • 11/12/2020 (04:04)
Turkish polymer markets extended their hikes to the final month of 2020. Although the size of monthly increases varied depending on the polymer, unprecedentedly rising shipping costs and reduced availability came to the fore as common triggers behind larger December gains.

Now questions in mind appear as below for Q1 2021:

*When will freight rates cool off?

*How will demand evolve in China prior to holiday?

*Will Turkey start to attract imports amid improved netbacks?

Sharply higher freights disrupted product flow

Import PVC supplies in Turkey have already been tight for several months. This was in tandem with lingering production issues as well as robust demand on a global scale since Q3. Tightness sent prices to more than a 12-year high in the country, exhausting many buyers.

PP, PE, PS, ABS and EPS markets also started to grapple with diminishing supplies as the last quarter of the year kicked off. This was because poor netbacks caused sellers to shy away from Turkey in the previous months. Steeply higher freight rates, high appetite of Chinese buyers and a lack of sufficient domestic supply also led to dried-up availability.

A container shortage led to massive hikes in transportation costs which were mirrored on polymer prices. Faster price hikes drove a panic atmosphere which gripped Turkish markets last week. More converters were tempted back to the market in fear of deepening constraints.

Moreover, costs of road transportation followed suit. Higher freights from Iran to Turkey drove rising offers for PP fibre, HDPE film and b/m, pipe 100 and polystyrene for this origin week over week.

A lack of Korean offers affected PPBC and styrenics the most

South Korean producers are already unable to offer January cargos for PP, PE citing a lack of booking space.

This largely affected PP block copolymer and HDPE markets. Distributors lifted their prices blaming their surging replacement costs and waning prompt supplies.

The locally-held PP copolymer injection market broke above the $1800/ton ex-warehouse Turkey, inc VAT threshold right before prices hit $1850/ton or even higher. PPRC injection started to be offered as high as $1900/ton with no deals at the time of press.

An HDPE buyer reported, “Our Korean supplier will not offer material to Turkey until mid-February given rising freights and a lack of empty containers. We will need to find alternative options to meet our requirements as end product demand remains active.” The scarcity of offers sent HDPE pipe 100 prices to a two-and-a-half-year high this week, according to the weekly average data from ChemOrbis.

In styrenics, lower allocations amid turnarounds accompanied by higher freights brought increases of more than $300/ton for Korean GPPS, HIPS and ABS from the previous month.

An EPS trader said, “We have not received any offers from Korea for 2 months now, while European prices spiked €150/ton on shortage.” Plus, domestic PS and EPS suppliers closed their order books, as players affirmed.

Restricted quotas from other regular suppliers, domestic sources

December shipment cargos from Saudi Arabia, Qatar, Egypt, Uzbekistan, Turkmenistan and Azerbaijan were limited for PP and PE. This stemmed from lingering output issues or bulky sales to China back in October and November.

Comments on low stocks on the side of Petkim also prevailed. “LDPE and PVC supplies are tight at the producer as demand is still active on some delays from Europe,” noted a participant.

Higher freights propelled firmer PET bottle and polyester markets with a lack of December shipments from Asia. Textile chips gained $20/ton on the week, while Chinese POY (300-500 denier) offers breached above $1000/ton CFR Turkey for nearing cargoes.

Will improved netbacks attract import cargos to Turkey in Q1?

Data from ChemOrbis Price Wizard suggest that Turkey’s homo-PP premium over China hit $185/ton, while LLDPE and HDPE trade $55-110/ton above this market. The discount of LDPE to China narrowed from $88/ton last week to $30/ton this week amid a steady trend in this market.

Turkey also regained its premium for other products including ABS and PS, while it continues to offer probably the highest netback for PVC among major markets.

Players are questioning whether or not Turkey can attract imports in the coming term now that it eventually offers improved netbacks and China is readying for New Year holidays in February.

Some participants hope to see an ease in tightness in case Turkey remains profitable. On the other side of the coin, logistical challenges are anticipated to continue to dominate polymer markets through the first months of 2021. “China’s buying appetite will remain under close watch in Q1,” said a large manufacturer
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