Turkey PP, PE markets yet to respond to firmer Asia as power cuts loom large

Polyolefin players in Turkey have been shattered by country-wide power cuts, which have hit plastics manufacturing and had knock-on effects on resin demand. As major industrial zones suffered from production losses, price discussions were rare. Thus, PP and PE have responded neither to the ongoing uptrend in Asian markets nor rising crude oil futures.



Converters suspend production due to outages

Polyolefin consumers from many industries, including packaging, strips, pipe systems, furniture, kitchenwares, container, stretch film, shopping, and trash bags as well as coatings were forced to shut their factories or lower their running rates starting from Monday.

This followed the introduction of energy restraints by the Ministry of Energy and Natural Resources due to a disruption to natural gas imports from Iran on January 20, 2022.

According to several companies operating at the heart of the sector, including Gaziantep, Istanbul, Izmir, Adana, Hatay, and Mersin, most facilities were closed for 2-4 days, and workers were sent on leave.

Authorities expect the power curbs to last around 10-15 days, although an official timeline has not been disclosed so far.

Unprecedented level of power cuts curbs polymer demand

Multiple manufacturers said, “Snowy weather has already disrupted operations at some downstream units since last week. Some companies have extended their shutdowns due to the recent power cuts. We fear that the restart process will lead to higher energy costs on the side of many converters.”

Polyolefin sellers were also on edge during the week as the restrictions would put PP and PE demand at risk and cast a pall on the February outlook. “Under normal circumstances, we were expecting to see improved demand in the upcoming weeks. However, if cuts last longer than expected, this may weigh on polyolefin consumption for a while,” opined traders.

Rising upstream costs and higher PP, PE prices in Asia may lift sentiment

Global oil benchmarks at multi-year highs have contributed to a firming trend in ethylene and propylene markets in Europe and Asia recently. Besides, the gains on the downstream side remained intact across Asia.

Import PP and PE markets in China and Southeast Asia followed an uptrend for the third successive week. These markets were propelled higher by easing Omicron measures, slowing import arrivals, and expectations of strong demand in the post-CNY holiday period, while adding to the scene was a slight uptick in spot ethylene prices in Asia. Falling domestic PP and PE stocks, as well as rising Dalian futures, also lent support to sellers in China. Indeed, a Saudi Arabian major started to seek $30-80/ton hikes for February in the country.

China based netback: No room for declines in Turkey

Besides, the narrower premium of Turkey’s import PE markets over the levels in China suggests that prices in Turkey do not have further room to decline for LDPE and HDPE film, in particular. As for PPH raffia, Turkey currently trades $400/ton above China amid elevated freight differences. “Higher expected monomer contracts in Europe may also provide an upper hand to suppliers,” opined a trader.

Nonetheless, sentiment in Turkey has yet to respond to the ongoing firming in Asian polyolefin markets for now. This is because energy-driven shutdowns at downstream facilities cast a pall on purchasing appetite and overshadowed supportive factors that may lift the markets in the coming weeks.

Demand remains on shaky ground

However, activity may not support visible hike attempts for PP and PE in the short term, considering the possible impact of energy cuts and cold weather on exports of goods, cash constraints, and adequate prompt supplies.

“The duration of the power cuts will play a key role in the demand outlook for PP and PE in Turkey. We hope the issue does not last longer than 10 days,” players concurred.

This week, Saudi Arabian PP raffia and fibre prices were assessed stable to slightly firmer at $1490-1520/ton and $1530-1550/ton, respectively CIF Turkey, subject to 6.5% customs duty, cash. Middle Eastern import offers were assessed unchanged at $1530-1560/ton for LDPE, $1400-1430/ton for LLDPE C4 film, and $1340-1360/ton for HDPE film CIF Turkey, subject to 6.5% duty given a lack of clarity over fresh announcements.