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Turkey’s PP market eases off from 7-month high on demand pressure

by Merve Madakbaşı -
  • 05/11/2021 (08:24)
PP prices have leveled off from multi-month highs as sellers yielded to muted demand in Turkey. Unsupportive derivative demand led to stiff resistance towards the upper ends of the market, in particular. The emergence of Asian origins mitigated the impact of still-limited supplies from Saudi Arabia.

Saudi Arabian raffia and fibre were assessed with slight discounts of $20/ton at $1750-1770/ton and $1770-1790/ton CIF Turkey, subject to 6.5% duty, respectively.

Prices had been on a bullish run since June

According to ChemOrbis Price Index, Turkey’s import PP markets had posted relentless hikes since H2 June, when the market bounced after a 3-month downtrend. From late June to late October, import PP raffia and fibre markets recorded cumulative increases of $600/ton (45%) and $560/ton (40.5%), respectively, the weekly average data suggested.

Import Prices– CIF Turkey – PP Raffia – PP Fibre

The main factor to fuel the rally was disrupted logistics amid climbing shipping costs, container shortages, and delayed deliveries, particularly from Turkey’s top supplier, namely Saudi Arabia. A lack of cargos from a Russian producer added to the scene. The rising upstream chain also lent extra support to sellers.

Buyers tried to offset their delayed cargos either from the prompt market or nearby sources. This is to say, the upward momentum was also supported by buying interest.

Mediocre derivative demand weighed on markets

However, activity started to be dimmed by the historic low lira/dollar parity coupled with high inflation in late Q3. Still, the lingering woes over logistics kept prices elevated. Moving into November, however, subdued demand took center stage. Indeed, the cumulative drop of the Turkish lira versus the American dollar has reached around 31% from early 2021 and created a challenging domestic economy.

PP started to stabilize in late October amid the combination of the currency impact on local business and seasonal factors. This week, both raffia and fibre prices came off from their peaks since discouraging demand outweighed supply constraints from mainstream sources.

Fibre consumption was crippled by lower running rates or shutdowns in the carpet industry. A buyer said, “We find distant cargos risky. Export orders fell as end customers in the US and Europe secured beyond their needs in the previous months and Christmas is nearing.”

Asian offers showed up on falls in China, easing freight

Juicy netbacks in Turkey coupled with easing freight rates from Asia have grabbed overseas sellers’ attention. South Korean homo-PP cargos started to emerge in H2 October, while Chinese PP prices have also emerged after a long time.

This was not caught by players’ surprise as Chinese PP makers have already ramped up their exports in recent weeks, particularly to Southeast Asia. This was due to weak demand and a bearish trend at home.

Chinese raffia, due for arrival by late December, was confirmed at $1720/ton, while fibre and non-woven offers for this origin were heard at $1750/ton CIF Turkey, subject to 6.5% duty. South Korean raffia was dealt at $1830/ton CIF, no duty, sharply lower than October.

Locally-held PPH also saw downward adjustments

Sellers in the distribution channel also applied discounts to stir buying appetite. The local raffia range was assessed $30-50/ton lower at $2250-2320/ton ex-warehouse Turkey, inc VAT after reaching almost an 8-month high in October. Fibre lost $20-50/ton from last week at $2300-2380/ton, while inj. and non-woven offers were reported as low as $2325/ton.

What lies ahead for the coming term?

Weak demand emanating from inflationary pressures may continue to outweigh lingering supply concerns for PP, particularly if competitive Asian cargos continue to find their way to Turkey. The fact that higher transportation and energy costs, as well as volatile parity, took their toll on demand may keep sellers on their toes.

Nonetheless, some players expect price corrections to appear minor, saying, “Saudi Arabian and Russian volumes have not been easing much. This may cap the downside. Whether or not the recent rebound in coal prices will prop up China’s PP markets again and purchases will pick up in Turkey remain uncertain for now, which will be key factors to track.”
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