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Turkey’s PP and PE markets track opposite directions in September

by Merve Madakbaşı - mmadakbasi@chemorbis.com
  • 09/09/2022 (19:10)
A rising tide has not lifted all the boats in Turkey’s polyolefin markets in September. PP and PE prices have moved on opposite paths so far in the midst of the prevailing supply-demand dynamics. Meanwhile, the pressure from muted end markets remains intact for both products, not to mention inflationary pressures across the board.

Players are now preoccupied with some questions as follows:

  • Will PP show a solid rebound amid lower supply?

  • Is the bottom in sight for PE following the 5-month slide?

  • To what extent can output cuts balance demand woes?

PPH sellers lift prices, copolymers yet to catch up

Sentiment for PP shifted last month following a 17-week long downtrend as razor-thin margins and evaporating premium over China encouraged sellers to adopt a firmer stance. The market hit the bottom in H2 August and the fading of previous lows lured buyers to the market to replenish some stocks. Sellers issued modest hikes for September homo-PP cargos counting on their good sales performance in August.
Meanwhile, the delta between Turkey and China has widened to around $130/ton as compared to just $50/ton a month ago.

Cautiously firmer homo-PP prices had a spillover impact on PP copolymer markets while reduced exports from South Korea and Europe added to the scene. Nonetheless, players admitted that demand has been unresponsive so far. A distributor lamented, “Although some producers halted their exports to Turkey amid low margins and run rate cuts, lackluster demand from consumers coupled with sufficient prompt supply keeps weighing on copolymer prices.”

Regular producers lower PP supplies to Turkey

Poor netbacks in Turkey caused some regular suppliers to reduce their export volumes to the country by September while others turned to different outlets that provide freight advantage, including India. Moreover, elevated energy prices prompted some major PP producers to cut their output, not to mention unexpected shutdowns.

Egyptian EPP is readying to conduct a turnaround at its 400,000 tons/year PP plant soon. Saudi Polymers is readying to bring its 400,000 tons/year PP unit offline in October for a scheduled turnaround. Saudi Arabian SPC shut one of its lines in late August following a minor incident. The plant has a total capacity of 280,000 tons/year, according to ChemOrbis Production Pro.

CIF Turkey – PP Raffia – Import Prices – LDPE – LLDPE – HDPE

PE slump slows down in September

The market has extended its losses for all PE grades to the fifth month in a row as slack end markets kept resin purchases at a bare minimum. Falling freight rates, liquidity issues, and record-high inflation that curtailed global consumption played key roles in the ongoing declines.

Besides, Turkey continued to carry a healthy premium over China’s import market, unlike PP. This also dragged PE prices down further, albeit to a lesser extent as compared to the previous months.

PE at a crossroads: Will the market change track in October?

Players have started to question whether or not the recent recovery in the PP market will have a spillover impact on PE in the coming term. “PE might be nearing the bottom as prices have already slumped a lot and some consumers may be willing to replenish their stocks. Plus, the energy crisis in Europe and some output cuts across the board may prop up the market,” traders opined.

Some Middle Eastern producers reported having limited HDPE supply for certain grades given temporary hiccups or slated turnarounds in the Middle East. Still, a solid rebound does not seem much likely in the short term given the current demand conditions.

Indeed, China’s import polyolefin markets mostly moved sideways this week amid replenishment activities for domestic materials. The nearing holidays, Covid measures, volatile crude oil futures, and sufficient domestic supply continue to keep sellers on the edge.

According to the weekly average data from ChemOrbis, Turkey’s premium over the Middle Eastern prices in China stands at $120/ton for LDPE and $150/ton for LLDPE and HDPE. These levels were above the $200/ton mark back in late August. This proves the easing pressure on Turkey’s import market and supports the view that prices may stabilize.

Global demand concerns remain intact

Some players expect PP prices to follow a stable to firmer trend owing to reduced supply, but adding that mediocre end markets will cap more notable hikes. Several converters keep running their factories at lower rates to combat limited end product orders and soaring utility costs.

As for PE, the trajectory will depend on buying enthusiasm among converters while the flow of American cargos will also remain under close watch. Players reported more offers for LLDPE and LDPE cargos for this origin this month although shipments were due for October. US PE offers formed the low end of the overall ranges while they stood around $20-40/ton below the Middle Eastern levels.
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