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Turkey PP and PE regain premium over China, LDPE fails to make a sprint

by Merve Madakbaşı -
  • 02/10/2020 (03:57)
Polyolefins in Turkey preserved their firm footing moving into October. Higher price goals counted on a lack of stock pressure on the side of Middle Eastern suppliers rather than a bright buying sentiment. Nonetheless, LDPE apparently fell short of this cautious firming.

Polyolefins started to offer negative netbacks in late Aug

Import PP and PE markets started to trade on par with or below China in late August/early September depending on the grade. Turkey lagged behind the rapid hikes driven by tight supplies and healthy demand in China, mainly for LDPE, meanwhile.

A plenty of duty free European offers emerged in Turkey amid weak demand in the region. They provided competitive edges for homo-PP fibre, LDPE and HDPE grades during September.

Unprofitable Turkey faced reduced Mid-Eastern volumes

Turkey has been a long way off tempting prices for sellers since H2 August despite some gains. Suppliers have lifted their offers or voiced higher sell ideas for October as well, feeling free from supply pressure thanks to their bulky sales to China previously.

According to the weekly average data from ChemOrbis, Turkey’s import PP raffia market is now carrying a premium of $52/ton over China after trading on par with or slightly below this market since mid-August.

Middle Eastern PP raffia and fibre offers were voiced up to $970-980/ton and $1030/ton, respectively, CIF Turkey, subject to 6.5% duty, but price discussions were thin.

Likewise, some PE producers sought $30-50/ton hikes for October this week. Buyers’ reaction has been lukewarm though based on a week-long holiday in China coupled with highly volatile Turkish lira. According to ChemOrbis data, Turkey’s import LLDPE c4 film market moved $25/ton above China, while HDPE film is carrying a $40/ton premium on a weekly average.

“All eyes have turned to imminent announcements from major Middle Eastern suppliers. Although prices rose, buyers are not that enthusiastic to purchase beyond their basic needs citing the blurry post-holiday outlook in China,” opined a major participant in Turkey.

Players are also curious about whether or not European offers will continue to find their way to Turkey now that October olefin contracts have settled softer in the region.

Sellers: LDPE failed to heat up

LDPE prices witnessed unprecedented highs in China until recently on the heels of growing tightness for Iranian supply, robust demand amid improving economy and higher oil prices.

Although prices in Turkey responded to some extent, Middle Eastern prices failed to keep up with China rally. They remained well below the awaited $1100/ton CIF Turkey threshold. ChemOrbis data suggest that import LDPE in Turkey still trades on par with the levels in China.

China’s import market softened ahead of holiday

Meanwhile, PP and PE prices were adjusted down in China as another factor that helped Turkey regain some premium. Some drops on Dalian Commodity Exchange (DCE), resolved supply constraints and waning demand ahead of National Day holiday on October 1-8 all weighed down on polyolefin prices in the country.

This also held buyers on the sidelines in Turkey. “The Chinese market may be dimmed by a supply glut after the holiday. This would probably cap larger increases in Turkey,” argued a converter.

Comments on virtual embargo from Saudi Arabia

Echoes of an informal embargo from Saudi Arabia on Turkish goods were on the agenda this week although the issue has not affected polymer markets directly so far.

According to some news, Saudi Arabia issued a virtual embargo on Turkish products as of early October. This caused jitters among some players who think that the textile and carpet industries, for which the southern region of Turkey stands as a hub, may be dimmed by the situation.

“If the issue persists, Turkey’s polymer imports from Saudi Arabia may also be affected. Yet, nothing is clear for now,” argued a participant. Players hope that authorities will find a solution to sustain bilateral trade.
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