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Turkey’s PE market stuck between weak fundamentals and up pressure from China

by Merve Madakbaşı -
  • 19/07/2019 (04:15)
Turkey’s import PE market seems to have mostly stabilized for LDPE and LLDPE as the second half of July has kicked off, although HDPE remains under pressure from slack buying interest.

Although players refrain from making certain predictions for the coming month, they are mostly convinced that prices have no room to move down further.

Have PE prices reached the bottom in Turkey?

China’s PE markets slightly firmed up earlier in July in the midst of positive progress in trade relations with the US after the G20 Summit in end June, before cooling off this very week. The fact that Turkey has already been trading below China for LLDPE and HDPE persuaded players that PE prices have already reached the bottom.

Manufacturers secured their requirements, paying monthly decreases in the previous couple of weeks, which sent prices to a decade low for LLDPE and HDPE. “Sellers are reluctant to concede to the levels that formed the low end of the market back in early July,” buyers affirmed.

Turkey trades at a discount to China for most products

Turkey is currently trading without a premium over China for LDPE film, while LLDPE film trades $35/ton below that market, according to the weekly average data from ChemOrbis Price Index.

HDPE film trades at a more visible discount of $65/ton to China, as weak demand weighed more on this product.

That is to say, Turkey has been offering only negative netback margins based on China to global suppliers in the PE market.

“The packaging industry has slowed recently on the top of the already weak pipe sector,” a manufacturer said, adding that the ongoing economic issues kept purchasing volumes modest for all PE products in general.

European PE shows up competitive in Turkey ahead of holidays

In July, import LDPE and HDPE offers from Europe have provided a competitive edge in Turkey. The local markets have been slumping since June across Europe with the downturn gaining speed in July. Imminent holidays must also be exerting extra pressure on European sellers as they want to relive their stocks in nearby export outlets.

Players said, “Supply is quite sufficient nowadays. Turkish buyers aim to keep their inventories at reasonable levels and meet their needs from nearby sources as well as from en-route or prompt cargos.”

What lies ahead for next month?

Expectations for August have yet to be set with modest demand and volatile oil markets on one hand and the ongoing upward pressure based on the theoretical netback to China on the other.

As for the short term, no considerable changes are seen likely ahead of fresh August announcements as most players have already wrapped up their monthly business. Players are set to watch China, where LDPE was on a stable to slightly firm path this week owing to diminishing supplies and firmer ethylene but LLDPE and HDPE remained under pressure from buyers’ cautiousness and the softer future market.

Some players believe that PE prices may roll over next month if not rise depending on the state of demand and global trends. “Suppliers may concede to steady deals if end demand fails to boost the market in Turkey amid long summer holidays in Europe and economic challenges. We need to see whether or not sellers will be able to renew confidence in China, as well,” opined a converter.
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