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Turkey’s PP market nosedives following Eid al-Fitr

by Merve Madakbaşı - mmadakbasi@chemorbis.com
  • 21/05/2021 (09:35)
Polypropylene prices have been receding since late March when the market underwent the pressure of easing supplies thanks to Chinese volumes and buyers’ stiff resistance toward high-priced resins. Demand remained lethargic right after long holidays which spurred sharper price cuts in Turkey heading toward June.

Import PPH Prices– Raffia – Fibre – CIF Turkey

Homo-PP broke below new thresholds in post-Eid free fall

Activity has been lackluster for two months now. A full lockdown between April 29-May 17 driven by rising COVID-19 cases in Turkey as well as religious and national holidays hammered demand further in May. Availability has been ample owing to the arrival of cargos with higher costs and rapid price cuts have kept purchases minimal under these circumstances.

PP raffia and fibre offers have sunk to new lows during this short working week as the easing of virus-induced restrictions and the end of holidays failed to spark buying appetite. Origins subject to 6.5% customs duty broke below the $1400/ton CIF threshold in a couple of cases, while PP fibre hit $1500/ton or lower than this depending on the origin.

"We are not optimistic about the demand outlook for the rest of this month as buyers seem to be covered nowadays and have no hurry to buy raw material. Activity may not pick up until June when fresh market levels will be clearer," traders said.

Total decreases reached up to 26% since mid-March

Import prices have slumped by 22% ($432/ton) for PP raffia and 26% ($556/ton) for PP fibre in the last two months, the weekly average data from ChemOrbis suggested. Still, these levels stand around $100/ton above early-year levels.

During the historic rally in February, Turkey’s import markets increased by 38% for raffia and 45% for fibre, owing to a severe shortage of supply caused by a combination of logistical chaos around the world, plant outages, and robust demand from Turkish converters.

Critical question: How further can the market plummet?

The near-term expectations call for an ongoing weakness for PP based on the assumption that buyers’ reluctance to purchase will persist until June, in the best scenario. Players do not foresee a reversal of trend soon and June offers seem to be set for additional losses since there is no supply concern.

“We believe that prices will soon break below new thresholds since we still have 10 days for May to end. Buyers are unwilling to inquire or bid for material ahead of June announcements given due to rapid falls and their existing stocks with higher costs,” opined some participants.

June PP prices are expected to surface with additional decreases, to put in a nutshell. Lower prices in China’s import market, signals of a slowdown in Europe, and the trajectory in virus-hit India also bolstered expectations for a downtrend stretching into the new month.

Nonetheless, nosediving market levels caused a head scratching question to arise recently: Where will be the bottom for Turkey’s PP market?

Looking for a clue in netback calculations, Turkey’s import PPH market currently carries a premium of $270/ton over China’s import PP market, according to the weekly average data from ChemOrbis. This points to the lowest gap between the two markets since January.

How long will Chinese PP exports continue to find their way to Turkey appears to be the key question to answer in the medium term considering that increased exports from the country had ceased astronomic hikes back in Q1.

This is simply because the more Turkey slumps, the more the arbitrage window from Asia will narrow. Shortly, whether or not the downtrend in China will remain intact will be pivotal for players.
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