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Turkey’s PP market retains strength moving into November

by Merve Madakbaşı -
  • 30/10/2020 (04:06)
Import PP prices are closing October on a strong note amid tentative supply concerns for Saudi Arabian cargos and buoyant carpet demand from export markets. Nevertheless, a bunch of global and domestic dynamics have recently cast a cloud on the outlook and may cap larger increases.

These factors are as follows:

Ø Sharp depreciation of Turkish lira spurred economic woes

Ø An intensifying pandemic led to renewed restrictions in Europe

Ø Global oil benchmarks slipped almost 5% amid gloomy demand outlook

Turkey carries 4-weeks low premium over China

Import prices added to their gains over the week in response to an upward pressure from the prevailing PPH offers to China, which hit the $1000/ton CFR threshold on the high end. Although PP raffia prices were assessed with $5-20/ton increases depending on origin, Turkey’s premium over China narrowed further to as low as $10/ton, the weekly data from ChemOrbis Index suggested.

Players: Larger PP fibre hikes may influence raffia

Now that November prices started to emerge higher than October, delta between raffia and fibre slightly widened to surpass $50/ton this week. A PP producer reported to ChemOrbis, “We maintained our PP raffia prices at $990/ton while raising fibre by $40/ton to near $1100/ton CIF threshold.”

Unlike other grades, fibre demand has slightly improved after some buyers made safety stocks due to supply concerns stemming from a virtual dispute between Turkey and Saudi Arabia. This stirred more notable gains for fibre when compared to raffia.

A seller reported, “We have achieved higher deals lately. Buyers tried to avoid further hikes in case of supply constraints. Several of them are exporters and procure raw material with re-export documents unlike the case for raffia.”

Some converters opined, “If fibre demand remains buoyant, more sellers would prefer to trade this product and raffia supply would be reduced eventually. This may push PP raffia prices up further.”

All-time low Lira/USD parity stalled local activity

On the other hand, the steep depreciation of the Turkish Lira against the American dollar drove a visible cautiousness in the market as the week wore on. “The local market retained its strength in terms of pricing considering the higher costs imports. However, activity was mostly curtailed by highly volatile parity as well as a shorter working week amid national holiday on Thursday,” marked players.

Eyes on China and Europe amid upstream moves, pandemic

The PP market will most likely enter the new month on a strong note owing to the unclear state of Saudi Arabian supplies and an evaporated premium over China. According to ChemOrbis Statistics, Saudi Arabia has been the number one PPH supplier to Turkey with more than 410,000 tons of exports to the country in January-August, 2020.

Nonetheless, the sentiment in China’s import PP market has recently faltered as the high season is drawing to an end soon and spot propylene prices in Asia came down a bit from a year high. Moreover, the impact of losses in the energy complex on buying sentiment is yet to be seen. Still, tight overseas supplies may hold the market over the short term, according to some players.

Players will also need to gauge the trend in Europe where the outcome of the November propylene contract was pending at the time of publication but expectations centered on rollovers. Needless to say, growing concerns over the rising number of COVID-19 cases weighed on regional markets as they led to renewed restrictions and curfews in major economies of Germany, Spain, Italy and France.
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